Why, Inc. Shares Will Soar to $65

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of, inc. (NYSE: CRM  ) rallied slightly this morning Deutsche Bank upgraded the enterprise cloud computing technologist from hold to buy.

So what: Along with the upgrade, analyst Karl Keirstead planted a price target of $65 on the stock, representing about 24% worth of upside to Friday's close. So while momentum traders might be turned off by Salesforce's sharp pullback in recent months, Keirstead's call could reflect a growing sense on Wall Street that its turnaround potential is becoming too cheap to pass up.

Now what: According to Deutsche, Salesforce's risk/reward trade-off is rather attractive at this point. "Our out-of-consensus neutral call has been based on a view that a) Street expectations about the pending January quarter results were running too high, b) there was the potential for some near-term disruption as new President Keith Block reengineered the sales force and c) the core SFA business could be decelerating," said Keirstead. "We're now more comfortable with these issues, the stock is down 20% from its highs and in our view the severe growth-to-value rotation over the last two months has played out." When you couple that upbeat near-term outlook with Salesforce's strong long-term prospects, it's tough to disagree with Deutsche's bullishness.

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  • Report this Comment On May 07, 2014, at 5:46 PM, dj235 wrote:

    Did you see how they came up with a price target of $65? They increased CRM EV multiple from 4.2 to 6.5. Heck they can put the price target any where.

    How can they say the price target is $65 and we get this price by changing the EV multiple from 4.2 to 6.5. Wow, so nothing has gotten better, they simply change the multiple of enterprise value. What is the target if you assume EV multiple is 3?

  • Report this Comment On May 19, 2014, at 5:42 PM, Baron wrote:

    @dj235, do you think they fudged the EV?

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Brian Pacampara

I take a look at big 10% moves, as well as stock-shaking analyst calls, on a daily basis for The Fool. While I don't believe in active trading, closely monitoring Mr. Market's mood swings can help identify long-term opportunities.

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