Morgan Stanley Removes Salesforce From 'Best Ideas' List

In a report published Monday, Morgan Stanley analysts maintained an Overweight rating on salesforce.com, inc. CRM, with a price target of $80, while removing the company from the "Best Ideas" list. The company's share price has surged 11.4 percent since April 28, driven by news of a potential acquisition. Although the analysts are optimistic about Salesforce.com's "long-term fundamental story," the stock appreciation balances the "near-term risk/reward perspective," since the analysts believe that the acquisition is "a relatively low probability event." In the report Morgan Stanley noted, "A strongly positive view on the strategic positioning of Salesforce.com is one of the key reasons we find a transaction to below probability. After several years of aggressive investment in expanding the solution portfolio (marketing, analytics, etc.) and bolstering distribution capabilities (strategic and vertical selling capabilities), we see Salesforce.com well-positioned to reap the yields on those investments -- which should propel the company to CEO Marc Benioff's $10B revenue target with significantly higher margins." With such growth prospects, Salesforce.com is unlikely to be willing to sell the company. Moreover, a deal that is estimated to be more than $60B would be very complicated, with few viable bidders, and "unprecedented in software, making it by nature low probability," the analysts added. A company like Oracle Corporation ORCL, with a large enterprise sales presence capable of selling strategic application solutions, could generate substantially larger synergies than an acquirer like Google Inc GOOGL or Microsoft Corporation MSFT, "which lack this strategic application selling capability," the analysts commented.