Shares in Salesforce.com Inc (NYSE:CRM) took a hammering on Wednesday morning, but French bank Exane takes a contrary view.
Investors have been spooked by the prospect of the customer relationship management software company going ahead with the rumored blockbuster bid for loss-making social media giant Twitter Inc (NYSE:TWTR).
The shares slumped 6.7% to US$67.80 but Exane has a punchy price target of US$95, based on a merger that has taken place rather than one that might.
Saleforce is splashing out US$700mln on data management platform Krux in a deal that will increasingly see it competing with Adobe in digital marketing.
“Krux is growing rapidly (c.100% revenue growth in 2015) and, while no financial metrics are available, we believe Salesforce has paid expensive multiples (EV [enterprise value]/Sales of 8-9x or more) for it.
“We note the company was valued at ‘only’ US$150mln in its latest round of funding (June 2014). The deal should close by January 2017,” Exane noted.
It may have overpaid, but strategically Exane believes it needed to get a data management platform and Krux was among the top three acquisition targets identified by Exane.
“Salesforce has been building its ‘Marketing Cloud’ offering for several years with the acquisition of ExactTarget in 2013 (for US$2.5bn) and e-commerce platform Demandware a few months ago (for US$2.8bn); however, the group was still missing a data management platform (DMP) to help clients mine customer data across the internet. In this area, the group had previously set up partnerships with independent platforms (incl. Krux); however, making an outright acquisition should enable better product integration. Going forward, this also means Salesforce should compete more directly against companies such as Adobe and Oracle,”Exane speculated.
Darden Restaurants Inc (NYSE:DRI) delivered better-than-expected fiscal first quarter earnings but Jefferies is sticking with its neutral position and US$64 price target.
The reasons for the earnings surprise were company specific rather than indicative of sector trends, and the broker continues to expect the July-September quarter just ended will have seen restaurateurs struggle.
“While we believe DRI is better positioned than most of casual dining and has solid momentum behind the OG brand, we remain at Hold given our broader industry concerns,” the broker said.
Brokers opinion differ over the significance of a drugs trial failure for Anglo-Swedish drugs giant AstraZeneca PLC (LON:AZN, NYSE:AZN).
Its anti-platelet drug, Brilinta, failed to meet its primary end-point in the EUCLID trial of patients with peripheral artery disease (PAD).
Brilinta did not demonstrate a benefit over clopidogrel, the medical standard for prevention of blood clots in coronary artery disease.
According to Goldman Sachs’s Keyur Parekh, the result exposes some inherent risks in Astra’s pipeline, following as it did on Brilinta’s failure in the SOCRATES trial for patients who have suffered a stroke,
“While Brilinta continues to be tested in the ongoing THEMIS trial (2018 readout) for CV [cardiovascular] disease in diabetes, PAD had been the main market expansion opportunity for Brilinta, and therefore EUCLID was key,” Parekh asserted, while reiterating a ‘sell’ recommendation on the stock.
Goldman Sachs predicts sales of Brilinta will still grow, from around US$821mln forecast this year to about US$1.2bn, but not as fast as the company had hoped.
JP Morgan argues the shares are worth holding, however, and calculates that expectations for a sales boost from PAD were only about US$600mln to US$700mln, which the broker reckons equates to about a t-3% reduction in net present value.
It reckons BRILINTA’s sales will peak at US$2.1bn.
“With Brilinta included in the US guidelines ahead of Plavix for the ACS [acute coronary syndrome] indication, we believe that today’s failure should not affect sales in the primary prevention setting, although a failure to beat Plavix in PAD could reduce doctors’ propensity to prescribe Brilinta over generic Plavix,” the broker said.