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Dow Jones Tumbles as Apple Stock Rises on Price Target Bump, Salesforce Stock Slumps on Expected Slack Acquisition

By Timothy Green - Nov 30, 2020 at 11:06AM

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An analyst became more optimistic on Apple's 5G prospects, and Salesforce stock headed lower as its rumored acquisition of Slack appears to be imminent.

The Dow Jones Industrial Average ( ^DJI -0.83% ) couldn't hold it together on Monday, slumping about 0.89% by 10:05 a.m. EST. The COVID-19 vaccine situation improved after Moderna released the full results of its phase 3 study, but the news wasn't enough to propel the markets higher. Moderna found a vaccine efficacy of 94.1% against COVID-19, with an efficacy of 100% against severe COVID-19 cases.

Shares of Apple ( AAPL -2.19% ) got a boost after receiving an analyst price target increase on 5G upgrade optimism. Meanwhile, shares of ( CRM -2.19% ) slumped on a report that the company's acquisition of Slack ( WORK ) is coming tomorrow.

5G text over earth.

Image source: Getty Images.

Apple gets a higher price target on 5G optimism

Asking people what they're going to do isn't a very reliable method of predicting what they're actually going to do. Surveys often indicate that some large percentage of Netflix's user base would cancel or downgrade their subscriptions in the face of a price increase, but Netflix has routinely raised prices over the years without suffering from any sort of significant customer exodus.

Given that surveys are unreliable, buying a stock based on the result of a survey probably isn't a good idea. Still, stock analysts need to find reasons to talk up their favorite stocks. On Monday, Morgan Stanley raised its price target on Apple stock from $171 to $191, citing the results of a survey of 3,500 people that indicated strong smartphone purchase intention driven by 5G technology.

Morgan Stanley pointed to long lead times for the iPhone 12 Pro and strong initial demand at U.S. wireless carriers as supporting evidence. Apple will outperform other smartphone companies in terms of upgrades, Morgan Stanley reckons, with a bull case calling for 268 million iPhone shipments in fiscal 2021. The current consensus analyst estimate for iPhone shipments is just 213 million.

It's still unclear how much consumers really care about 5G technology. No one has made a particularly strong case for the tech, other than "it's faster." How willing are consumers to upgrade their pricey phones during a pandemic, and without the economic stimulus they had earlier in the year? We'll get a good idea when Apple reports its quarterly results sometime in January.

Shares of Apple were up about 1.9% Monday morning. The tech stock has gained roughly 62% so far this year.

Salesforce could announce Slack acquisition tomorrow

CNBC reported on Monday that Salesforce is close to announcing the acquisition of collaboration software provider Slack. CNBC's sources say that the announcement is coming after the market closes on Tuesday, right alongside Salesforce's quarterly report.

While an exact price won't be known until the deal is announced, Salesforce is expected to pay a premium to Slack's current price, according to CNBC's sources. The sources also say that the deal is expected to be half cash and half stock.

With Slack currently valued around $24 billion after Monday's surge, a deal for the software company would be the biggest acquisition Salesforce has ever made. It would also be one of the largest software acquisitions in history.

Slack's biggest competitor is Microsoft Teams. Microsoft bundles Teams with some of its subscription Office plans for businesses, giving the company a key advantage. Salesforce could do something similar with Slack, pushing the software on its vast base of existing users.

Shares of Salesforce were down 3.5% Monday morning, while shares of Slack had jumped about 3.6%.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
$160.18 (-2.19%) $-3.58
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$34,351.82 (-0.83%) $-287.97, inc. Stock Quote, inc.
$255.48 (-2.19%) $-5.72
Slack Technologies, Inc. Stock Quote
Slack Technologies, Inc.

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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