Salesforce’s Strategic and Financially Sound Acquisition of Informatica Backed by Analyst’s Buy Rating

Keith Weiss, an analyst from Morgan Stanley, maintained the Buy rating on Salesforce (CRM – Research Report). The associated price target remains the same with $350.00.

Keith Weiss has given his Buy rating due to a combination of factors related to Salesforce’s approach to mergers and acquisitions, particularly in the context of the rumored deal with Informatica. Despite the risks associated with significant M&A activities, Weiss believes that this potential acquisition aligns with Salesforce’s criteria for responsible M&A. The deal is considered to be at a reasonable price, leveraging the company’s strong balance sheet without the need for shareholder dilution, and it is expected to be margin accretive. Moreover, Salesforce’s framework, devised post the Slack acquisition backlash, emphasizes a deal’s strategic fit, reasonable pricing, balance sheet usage, and a path to margin accretion, all of which are apparently met in the Informatica scenario.

Weiss’s confidence in the stock also stems from the financial metrics of the rumored deal. The transaction, valued at $12 billion, represents a multiple of 22X EV/CY24 adjusted free cash flow, which is seen as a discount compared to previous software acquisitions. With Salesforce’s substantial cash reserves and expected free cash flow generation, the deal is anticipated to be neutral to slightly positive to earnings per share, even before considering any synergies. This suggests a responsible use of Salesforce’s financial resources and a strategic enhancement to the company’s existing capabilities, particularly in relation to Mulesoft’s offerings.

In another report released today, BMO Capital also assigned a Buy rating to the stock with a $335.00 price target.

Based on the recent corporate insider activity of 413 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of CRM in relation to earlier this year.

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Salesforce (CRM) Company Description:

salesforce.com, inc. engages in the design and development of cloud-based enterprise software for customer relationship management. Its solutions include sales force automation, customer service and support, marketing automation, digital commerce, community management, collaboration, industry-specific solutions, and salesforce platform. The firm also provides guidance, support, training, and advisory services. The company was founded by Marc Russell Benioff, Parker Harris, David Moellenhoff, and Frank Dominguez in February 1999 and is headquartered in San Francisco, CA.