Salesforce.com headquarters in San Francisco.
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Salesforce.com shares are inching higher in a sharply lower market after Morgan Stanley software analyst Keith Weiss upped his rating on the cloud-based enterprise software company to Overweight from Equal Weight, while keeping his $270 price target.
Salesforce shares (ticker: CRM) were up 1.7%, at $217.93, in recent trading. The S&P 500 was down 1.5%.
The stock is down about 25% from its 52-week intraday peak, dramatically underperforming the market since the announcement last December of the company’s agreement to acquire the collaborative communications company Slack Technologies (WORK) for $27.7 billion. Not long before that, Weiss had turned cautious on Salesforce shares, citing a “lack of confidence” in the company’s ability to significantly expand margins.
But now Weiss contends that Salesforce is “well positioned for ramping digital transformation demand,” with management providing “more constructive margin commentary.” He adds that the selloff in the stock “has made the valuation much more attractive,” with the stock now trading at about seven times expected calendar 2022 sales. He asserted that “an improving demand environment and a more balanced conversation from management on margins tilts the risk/reward decidedly more favorably.”
He writes: “Leading franchises do not stay cheap for long, particularly against the strong demand backdrop we foresee over the next several years.”
Write to Eric J. Savitz at [email protected]
