Pivotal Research Cuts salesforce.com, inc. (NYSE:CRM) Price Target

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Dallas, Texas 04/24/2014 (FINANCIALSTRENDS) –  salesforce.com, inc. (NYSE:CRM) has mostly been on a “hold” or “neutral” pattern among analysts because of its generous marketing spend that’s got investors antsy. It’s a given that the company’s investment in marketing is going to pay off big-time in the near future. But you wouldn’t know that if you were looking at their financial results for the past year or so.

The Pivotal Straw that Broke salesforce.com’s back?

For the last couple of months, analysts including Zacks have continued to maintain a “neutral” rating for CRM. Zacks updated ratings on March 3 and then again on April 11, and kept the neutral rating, although it did drop the price target for CRM from $65 to $57. B. Riley initiated coverage for CRM, and began with a neutral rating. Back in February, Deutsche Bank analysts likewise kept their hold rating while hiking the price target from $60 to $65.

None of this paints a clear picture, other than to say that no analyst wants to go on the record in favor of buying CRM. Now comes the news that Pivotal Research is maintaining its “buy” rating for CRM, but cutting the price target from $77 to $74. When one of your strongest supporters who has maintained a “buy” rating for a long time cuts your price target, it’s not an insignificant event.

Why the Ratings Don’t Mean Squat

These ratings may sway investors over the short-term, but it doesn’t much about the company’s long-term prospects, which are as solid as ever. The fact is that despite an earnings chart for the last year that’s trying to dig deeper and harder every quarter, CRM is still on track to stay atop the heap with their cloud-based services and solutions. The company’s top-line growth has been superlative, and the CRM market as whole is growing just as fast.

The key is knowing when  salesforce.com decides they have grown enough and have a sufficient market share to be able to cut back on the marketing spend. That’s when the growth gains will start showing up as actual profits in the quarterly and annual reports.

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