Option Trade 
salesforce.com, inc. (NYSE:CRM) Calls 
Tuesday, 23 February, 2016

**OPTION TRADE: Buy the CRM May 2016 65.000 call (CRM160520C00065000) at approximately $4.90. Place a pre-determined sell at $10.00.

Note: No protective stop losses added -- but if you wish to do so make it $2.00.

by Ian Harvey

February 23, 2016

salesforce.com, inc. (NYSE: CRM), a provider of enterprise cloud computing and social enterprise solutions, is set to report fourth-quarter fiscal results on February 24th, and expected to report revenue above the average analyst estimate. The cloud-based software maker has been gaining market share from Oracle and SAP in customer relationship management software. The company also bought sales software maker SteelBrick in December for about $360 million.

CRM stock has now declined more than 30% since the start of fiscal year 2016 (FY16), compared to the Dow Jones Index, which fell 8% this year – this provides plenty of scope for an upward surge.

The company has a one year high of $82.90 and a one year low of $52.60. Currently, Salesforce.com has an average volume of 5.18M.

Revenues increased 23.7% year over year and the improvement was primarily attributed to rapid adoption of the company's cloud-based solutions. Also, higher demand for Salesforce ExactTarget Marketing Cloud platform, part of the SalesforceArray Customer Platform, contributed to the growth. It is expected that the trend will continue in fiscal fourth quarter.

The higher number of deal wins and geographical contributions should boost results in the to-be-reported quarter as well. Overall, the company's diverse cloud offerings and considerable spending on digital marketing remain the catalysts. Moreover, strategic acquisitions and the resultant synergies are expected to drive long-term growth.

Considering the increased customer adoption and satisfactory performances, market research firm Gartner acknowledged Salesforce as the leading social CRM solution provider. It is believed that the rapid adoption of the company's platforms indicate solid growth opportunities in the expanding cloud computing space in turn, supporting results in the upcoming quarter.

After J.P. Morgan and Canaccord Genuity assigned a Buy rating to Salesforce.com in the last month, the company received another Buy, this time from Roth Capital. Analyst Richard Baldry maintained a Buy rating on Salesforce.com yesterday and set a price target of $93. The company’s shares opened today at $63.98.

Baldry noted, “CRM’s most recent 3QF16 results were strong, in our view, with pro forma EPS beating our forecast on solid revenue upside and incremental cost leverage. With 24% yr/yr revenue growth achieved despite a 3% currency headwind, Salesforce.com remains the strongest growing large-cap tech company we are aware of. We expect these trends to continue in 4QF16 and in its F17 outlook despite conflicting messaging across the growth-software space.”

Also, Jefferies analysts have backed CRM, and bumped its rating from Underperform to Hold, ahead of the fourth quarter of fiscal 2016 (4QFY16) earnings results.

As well, Deutsche Bank has maintained its bullish stance on the shares, and issued favorable comments following its recent industry checks. The firm’s analysts expect the company to provide upbeat quarterly results, as its recent checks indicated solid fourth-quarter deal momentum.

Currently, the analyst consensus on Salesforce.com is Strong Buy and the average price target is $86.63, representing a 35.4% upside.

Harvey’s Options Volatility Indicator

Conclusion

Salesforce, has strong fundamentals, rising margins and a leading position in the Cloud segment.

Market checks revealed that “things are good” at Salesforce, with strong 4QF16 deal momentum with Service Cloud selling well. On the sales rep front, the move to a greater vertical emphasis is well underway.

Large enterprise CIO checks indicate an increase in spend on customer facing technology in 2016.

Salesforce has disclosed a 10-20 percent increase in the per-user-per-month price points for the 3 editions of the new Sales Cloud and Service Cloud platform. The company is also raising the prices for recently-acquired SteelBrick by 30-75 percent.

Therefore, based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..

**OPTION TRADE: Buy the CRM May 2016 65.000 call (CRM160520C00065000) at approximately $4.90. Place a pre-determined sell at $10.00.

Note: No protective stop losses added -- but if you wish to do so make it $2.00.

”Success is simple. Do what's right, the right way, at the right time.”

Option Tip for your Success!
Options traders are not successful because they win.
Options traders win because they are successful.



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