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    Salesforce is a bargain Wall Street analysts say

    摘要:Despite a boatload of massive acquisitions and concerns about the core business, Wall Street thinks Salesforce is a keeper.

      Salesforce's stock price is down 10% since August 1 when it closed on its $14 billion all-stock deal for Tableau.

      Investors were also unsure that the company immediately announced another big acquisition, giving rise to fears that its core business may no longer by high growth enough to justify a high stock price.

      And Wall Street analysts are not expecting great things for the stock after Salesforce reports its second quarter next week either.

      But they say that all of this adds up to a reason to buy the stock.

      Click here for more BI Prime stories.

      Salesforce's stock price is down 10% since August 1 when it closed on its massive, $14 billion all-stock deal for Tableau.

      And Wall Street analysts like Morgan Stanley's Keith Weiss and Nomura's Christopher Eberle say that means the time is ripe to buy the stock.

      Weiss thinks the stock is a deal at under $150 a share, and will rebound to $178 share over time, with Eberle predicting $180.

      “Significant investor concern around a slowdown in the core business creates a strong buying opportunity,” Weiss writes in a recent research note. He rates the stock “overweight.”

      The stock is down for a lot of reasons. The big one is because investors are worried that Salesforce has run out of growth in its main market — cloud software for sales and marketing — and is therefore spending big bucks to go buy growth through pricey acquisitions. MarketWatch's Daniel Newman even said the Tableau acquisition “smacks of desperation.”

      The stock is also down in part because of the dilutive impact of the Tableau deal — Salesforce issued more shares to help pay for the deal and warned investors that earnings per share would decline 20 cents to 22 cents, with 2020 adjusted EPS now anticipated at $2.68 to $2.70.

      It didn't help that Salesforce submitted a bunch of odd corrections after it announced the original $15 billion deal in June with. The original acquisition announcement sent Salesforce's stock tumbling, but in the days that followed Salesforce explained in updated SEC filings that it had made some calculating errors and that it was paying only 840 million of its shares to finance the all-stock deal, not 900 million shares.

      That's a good thing for shareholders since it means the hit to Salesforce's earnings per share won't be as bad. But the company's clumsy delivery was not very inspiring, to say the least.

      The ink wasn't even dry on the Tableu deal — Salesforce's largest acquisition ever — when it announced another big-ticket deal. Salesforce said last week that it will pay $1.5 billion in cash and stock to buy ClickSoftware.

      Although Salesforce's shopping spree is raising eyebrows, this purchase makes a lot of sense on its face. As Morgan Stanely's Weiss explained, Salesforce jointly developed its field service management product with ClickSoftware, whose product helps companies track things like sending repair people to customer sites. Salesforce was licensing some of ClickSoftware's software for this product and it's one of the fastest growing areas in the Salesforce Service Cloud. So it makes sense to bring that in-house, even at $1.5 billion price tag.

      All of that is on top of the deal announced in April in which Salesforce said it was buying its own non-profit arm, Salesforce.org, for $300 million.

      “We see a lot of noise that must be sorted through this quarter, following the CRM.org [the Salesforce.org deal], DATA [Tableau], and, more recently, ClickSoftware acquisitions, as well as multiple FY guidance revisions. We see difficult comps[comparisons] in both F2Q and F3Q. ... We continue to highlight the uncertain impact of the moving pieces created via recent acquisitions and proposed acquisitions (such as ClickSoftware),” Eberle writes.

      MuleSoft proved the naysayers wrong

      Yes both Weiss and Eberle believe that Salesforce has proven it can assimilate large acquisitions.

      MuleSoft is the main example. That $6.5 billion deal was Salesforce's biggest until the Tableau acquisition, and faced plenty of skeptics at the time that Salesforce was paying too much. But a year later, MuleSoft has been hailed as the company's bright spot, its major source of subscription growth.

      With all these short term issues weighing on the stock, Weiss warns that it probably won't skyrocket after the company reports Q2 earnings next week.

      “A seasonally weaker quarter, with mounting FX impacts and the messiness of two recent acquisitions, we don't necessarily see Q2 as a compelling catalyst (rather we like the current price levels),” he writes.

      They are telling investors to be patient.

      “Nonetheless, we continue to see CRM as a core long-term holding in the software space. Reiterate Buy and $180 TP [target price],” Eberle writes.

      And they are not alone. Out of 39 analysts tracked by Yahoo finance, the average share price target is is $183.31 and the average rating is buy/strong buy.

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