Salesforce has come to dominate the market for cloud-based customer-relationship management software. Workday leads the market for cloud-based human-capital-management software, used to manage HR departments, and has jumped into the market for the financial software tools known as enterprise resource planning, or ERP.
And here’s something they have in common: Late Monday, Rosenblatt Securities analyst Yun Kim launched coverage of the two companies with Sell ratings.
For Salesforce, which closed Monday at $161.47, his target price is $120. For Workday, which ended Monday at $148.47, his target is $110.
Kim has a similar view on each stock: He sees the potential for slower-than-consensus revenue growth ahead, which he fears could trigger multiple compression in both cases.
Salesforce, he writes in a research note, “currently enjoys a de facto enterprise standard status in the enterprise business application market.” That’s helped drive its 20%-plus annual revenue growth rate—impressive performance for a company that has been public since 2004. But Kim finds that “large scale business application deployment is becoming a lower priority among large organizations,” and predicts that “large deal activity [will] slow even after the IT spending rebounds.”
He thinks the company’s ability to churn out 20% growth year after year—and its target of $35 billion in revenue by fiscal year 2024—are in doubt. And if that happens, Salesforce shares will be hit with multiple compression.