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Analysts See Solid Q1 For Salesforce; Merger News Unlikely

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60% Return From Reynolds' Smoking Hot Opportunity (Seeking Alpha), Inc. (NYSE: CRM) probably won't shed light on its rumored acquisition when it posts results Wednesday, an analyst said.

Unconfirmed reports have suggested the customer relations management company is evaluating at least one buyout offer.

"The price tag and deal size make us believe a deal is unlikely, said RBC's Ross MacMillan, who figures Salesforce might post a "positive surprise" relative to its first-quarter operating margin.

MKM's Kevin Buttigieg said the company's first quarter billings growth will slow sequentially on seasonal factors, although he expects "solid results."

With Salesforce's share price up more than 20 percent year-to-date, "it may have gotten ahead of fundamentals," said Buttigieg, although he maintained a Buy rating and $80 target.

Salesforce Chief Executive Marc Benioff declined last week to answer questions on recent takeover talk, and MacMillan said he'd be surprised if the company offered comment in its earnings conference call.

Merger speculation, which surfaced April 29, presents "some modest risk" of slowing down business for Salesforce amid resulting uncertainly among customers, according to MacMillan.

"But we haven't uncovered much evidence of this from our field work," MacMillan said.

As for fundamentals, "some deceleration is inevitable," according to MacMillan.

Salesforce's billings growth has already slowed to about 32 percent in the current year, from 35 percent in 2013.

"If this were to fall below 20 percent in the next 18 months, Salesforce would no longer be seen as a growth stock," MacMillan said. "This is not an easy transition."

But MacMillan reiterated an Outperform rating and $79 target on Salesforce, and said new product offerings later this year will support its share price.

Latest Ratings for CRM

Oct 2016RosenblattInitiates Coverage OnBuy
Oct 2016DA DavidsonMaintainsNeutral
Sep 2016CitigroupMaintainsBuy

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Posted-In: Kevin Buttigieg MKM RBC Ross MacMillanAnalyst Color Reiteration Analyst Ratings


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