New Threads Only:  Add to Google Reader or Homepage
New Threads & Replies:  Add to Google Reader or Homepage
Forums are for serious investors only. GuruFocus Forum Rules.

Forum List » Value Ideas and Strategies
Share and discuss value investing ideas and investing strategies.
New Topic
Goto Thread: PreviousNext
Goto: Forum ListMessage ListNew TopicLog In
Salesforce and Workday Are Good Investments
Posted by: jaggom (IP Logged)
Date: April 28, 2014 05:20PM

Several companies are migrating to the cloud platform. Salesforce.com (CRM) is one of those leading companies providing cloud computing solutions. It has a strong product portfolio with over 100,000 customers and offers cloud-enabled CRM (Customer Relationship Management) solutions.

The company is witnessing constant growth in revenue and its recent acquisition of ExactTarget is also contributing to revenue growth.

Salesforce on a Terrific Run

Salesforce.com projects revenue in the range of $4 billion to $4.025 billion for the current fiscal year, an increase of 31%-32% year-over-year and is confident about its prospects.

The market for cloud computing software is projected to be around $35.6 billion. Salesforce.com is a well established name in the cloud space and is popular among its customers due to its quality, support and features offered. Salesforce.com, through its services, is focused on reducing costs by saving manpower cost, capital cost and reduced business complexities for cloud customers.

Various corporate organizations are going with Salesforce.com for cloud computing due to its reduced implementation time with an accelerated return on investment.

Salesforce.com recently tied up with Oracle (ORCL) that illustrates its capabilities and market strength. The tie-up enables Salesforce to use Oracle’s software and hardware, allowing it to serve a wider customer base. Salesforce entered into a partnership with Workday (WDAY) recently, which is a well-known player in the cloud and this tie up is good news for both companies.

Salesforce’s earnings are expected to grow at a CAGR of almost 28% over the next five years, which is significantly above the industry average of 16%. This impressive growth rate is expected to be achieved through the company’s alliances and huge customer base.

A Look at Workday

Workday is a subscription-based cloud-enabled software solution provider. It provides software solutions regarding Financial Management and Human Capital Management.

The company has displayed robust results of late. The revenue growth rate increased from 71.5% in the previous year quarter to $107.6 million currently. The company has close to 500 customers. Workday is generating around 75% of its total revenue from subscriptions.

However, operating expense increased from $60.8 million in the year-ago quarter to $99.1 million in the current quarter. The company plans to expand globally and release Workday Payroll for France and the U.K. targeted by 2016.

Going forward, Workday is expected to grow at a solid pace. Its earnings will grow at a terrific annual rate of 50% for the next five years as predicted by Yahoo! Finance. This is an impressive growth rate and tie-ups with bigger companies such as Salesforce.com should further boost Workday’s growth.

Workday’s investment for long term growth would probably contract its short term profitability but analysts expect solid long-term performance. The company has surpassed earnings estimates comprehensively in the last four quarters with 25% increase on an average.

Conclusion

Both cloud players are expected to grow effectively in the future and so investors should consider taking a closer look at them. Salesforce stock must be considered by more conservative investors as it is profitable on a non-GAAP basis, but those having a higher risk appetite must probably look into Workday due to its terrific earnings growth estimates.



Stocks Discussed: CRM, WDAY,
Rate this post:

Rating: 0.0/5 (0 votes)





Sorry, only registered users may post in this forum.

Please Login if you have an account or Create a Free Account if you don't
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK