1 Date: 10/16/2012 Analyst Name: Matt Leid CIF Stock Recommendation Report (Fall 2012) Company Name and Ticker: Salesforce.com (CRM) Section (A) Summary Recommendation Buy: Yes No Target Price: NA Stop-Loss Price: NA Sector: Information Technology Industry: Software Services Market Cap (in Billions): 20.87 # of Shrs. O/S (in Millions): 139 Current Price: $153.29 52 WK Hi: $164.75 52 WK Low: $94.09 EBO Valuation: $15.02 Morningstar (MS) Fair Value Est.: $81.00 MS FV Uncertainty: Average MS Consider Buying: $56.70 MS Consider Selling: $109.40 EPS (TTM): $1.31 EPS (FY1): $1.50 EPS (FY2): $1.99 MS Star Rating: One star Next Fiscal Yr. End ”Year”: 2013 “Month”: January Last Fiscal Qtr. End: Less Than 8 WK: Y N If Less Than 8 WK, next Earnings Ann. Date: Analyst Consensus Recommendation: Outperform Forward P/E: 77.03 Mean LT Growth: 27.85% PEG: 2.77 Beta: 1.40 % Inst. Ownership: 100.46% Inst. Ownership- Net Buy: Y N Short Interest Ratio: 6.40 Short as % of Float: 11.90% Ratio Analysis Company Industry Sector P/E (TTM) __ 28.53 19.74 P/S (TTM) 7.90 3.14 3.57 P/B (MRQ) 11.03 4.35 3.72 P/CF (TTM) 140.46 15.43 13.31 Dividend Yield __ 2.27 1.94 Total Debt/Equity (MRQ) 26.87 12.75 18.08 Net Profit Margin (TTM) -1.40 15.72 13.88 ROA (TTM) -0.94 12.63 14.34 ROE (TTM) -2.24 24.30 20.36
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Date: 10/16/2012
Analyst Name: Matt Leid
CIF Stock Recommendation Report (Fall 2012)
Company Name and Ticker: Salesforce.com (CRM)
Section (A) Summary
Recommendation Buy: Yes No Target Price: NA Stop-Loss Price: NA
Sector: Information Technology
Industry: Software Services
Market Cap (in Billions): 20.87
# of Shrs. O/S (in Millions): 139
Current Price: $153.29 52 WK Hi: $164.75
52 WK Low: $94.09 EBO Valuation: $15.02
Morningstar (MS) Fair Value Est.: $81.00
MS FV Uncertainty: Average
MS Consider Buying: $56.70
MS Consider Selling: $109.40
EPS (TTM): $1.31 EPS (FY1): $1.50 EPS (FY2): $1.99 MS Star Rating: One star
Next Fiscal Yr. End ”Year”: 2013 “Month”: January
Last Fiscal Qtr. End: Less Than 8 WK: Y N
If Less Than 8 WK, next Earnings Ann. Date:
Analyst Consensus Recommendation: Outperform
Forward P/E: 77.03
Mean LT Growth: 27.85%
PEG: 2.77
Beta: 1.40
% Inst. Ownership: 100.46%
Inst. Ownership- Net Buy: Y N
Short Interest Ratio: 6.40
Short as % of Float: 11.90%
Ratio Analysis Company Industry Sector
P/E (TTM) __ 28.53 19.74
P/S (TTM) 7.90 3.14 3.57
P/B (MRQ) 11.03 4.35 3.72
P/CF (TTM) 140.46 15.43 13.31
Dividend Yield __ 2.27 1.94
Total Debt/Equity (MRQ) 26.87 12.75 18.08
Net Profit Margin (TTM) -1.40 15.72 13.88
ROA (TTM) -0.94 12.63 14.34
ROE (TTM) -2.24 24.30 20.36
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Investment Thesis Summary
Company Profile: Salesforce.com provides enterprise cloud computing and social enterprise solutions. Ultimately, Salesforce.com provides its customers with applications for customer and collaboration relationship management through the internet.
Fundamental Valuation: The stock seems to be overvalued based on its growth rate and current numbers.
Relative Valuation: The stock seems to be overvalued compared to its competition.
Revenue and Earnings Estimates: High growth rates are expected for this company
Analyst Recommendations: Analysts believe that this stock will outperform.
Institutional Ownership: The company has an extremely high amount of institutional ownership.
Short Interest: The short interest is amount average, but has been increasing.
Stock Price Chart: The stock price has increased above the average return in the past.
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Section (B) Company Profile (two pages maximum)
Company Summary
Salesforce.com provides enterprise cloud computing and social enterprise solutions. Ultimately,
Salesforce.com provides its customers with applications for customer and collaboration relationship
management through the internet. The company has been incorporated since February 1999. Salesforce.com
uses both internet browsers and mobile devices to deliver its services to its customers. Its social enterprise
applications and platforms are sold to businesses on a subscription basis. The company has a direct sales
team that is responsible for most of the company’s sales, but they also attract some business indirectly
through partnerships (Reuters, 1).
“The Company introduced Chatter, a collaboration application for the enterprise to connect and share
information securely and in real-time. It serves its customers from third-party data center hosting facilities
located in the United States and other countries. The Company’s primary applications are sales cloud, service
cloud, salesforce chatter, Salesforce Radian6 and Salesforce Data.com.” (Reuters, 1).
Salesforce.com’s customers uses Salesforce.com’s services to record, track, and share information about sales
opportunities, sales leads, sales forecasts, the sales process, closed business, and manage sales territories.
Customers also can create social profiles for their clients based on information from social networking sites
such as Facebook, Twitter, and LinkedIn (Reuters, 2).
Salesforce.com also offers its customers consulting, training, and development services in order to facilitate
the adoption of its social enterprise services. These services are usually billed on a time and materials basis.
These services are through both traditional classroom and online classroom settings.
Business Model, Competition, Environment and Strategy
Business Model and Strategy:
Salesforce.com sells its services on a subscription basis. Most of the sales revenue comes from direct
marketing, but the company also gets some revenue indirectly through its partnerships. The company works
with its customers to insure that they are able to utilize their services to their full potential. Salesforce.com’s
services are centered around trying to improve a firm’s sales by better managing customer relations.
Competition and Environment:
Salesforce.com is in the internet services industry, which is marked by high levels of competition. Overall, the
industry has fairly low barriers to entry due to low capital requirements and high rivalry among firms because
of high strategic stakes. The company has many customers, which makes the customer’s bargaining power
low. They have few suppliers, which makes the bargaining power of suppliers fairly high. Lastly, the threat of
substitute products is moderate.
The services that Salesforce.com provides is done differently than it has been in the past which makes this
particular type of business very young. Many analysts believe that the level of competition Salesforce faces is
likely to intensify in the coming years.
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Revenue and Earnings History
We see below that revenue has been increasing every single year. This is a very positive sign for the value of
the stock. However, we see that actually earnings per share as fluctuated. Most recently, the earnings
number was negative. This negative earnings number leads us to question whether or not our investment
would provide us with a solid return. Increasing sales isn’t good enough to outweigh negative earnings, and
overall these numbers provide a relatively neutral result, if not a negative one.