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Salesforce stock gains momentum with data/AI expansion through new acquisition - Mizuho

EditorEmilio Ghigini
Published 09/06/2024, 06:57 AM
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On Friday, salesforce.com (NYSE:CRM) stock maintained its positive outlook from Mizuho Securities after announcing its definitive agreement to acquire Own Company, a leading data protection and data management solutions provider, for approximately $1.9 billion. The acquisition is seen as a strategic move to bolster Salesforce (NYSE:CRM)'s data and artificial intelligence capabilities.


The transaction, expected to be free cash flow accretive in the second year following its completion, aligns with Salesforce's commitment to financial discipline in mergers and acquisitions. Although Salesforce has not disclosed the potential impact on operating margins, the acquisition is not anticipated to derail the company's operating margin progression.


Mizuho's affirmation of the Outperform rating and $300.00 price target reflects confidence in Salesforce's strategic direction. The acquisition of Own Company is perceived as a disciplined approach to expanding Salesforce's portfolio and enhancing its long-term growth prospects.


The deal is part of Salesforce's broader strategy to integrate advanced data management and artificial intelligence into its offerings. This move is expected to provide customers with more robust tools for data protection, a critical aspect in today's digital landscape.


In summary, the acquisition of Own Company by Salesforce is viewed as a calculated step to strengthen the company's data and AI strategy, without compromising its financial goals or operating margin outlook. Mizuho Securities' reiterated Outperform rating and price target suggest a positive view of Salesforce's market positioning following this strategic initiative.


In other recent news, Salesforce has announced plans to acquire Own Company, a data protection and management solutions provider, for $1.9 billion. This strategic move is expected to boost Salesforce's capabilities in data security and compliance. The acquisition is set to close in the fourth quarter of Salesforce's fiscal year 2025.


In financial news, Salesforce has reported a robust second-quarter result with earnings per share of $2.56, surpassing both the consensus estimate of $2.36 and the previous year's $2.12 figure. This was accompanied by an 8% increase in sales, slightly exceeding expectations, driven by a 9% rise in subscription and support revenues.


Several financial firms, including Deutsche Bank, CFRA, TD Cowen, BMO Capital Markets, Canaccord Genuity, and Loop Capital, have adjusted their price targets for Salesforce. Notably, Deutsche Bank maintained a Buy rating while CFRA maintained its Strong Buy rating.


Salesforce's CFO, Amy Weaver, has announced her plans to step down in early 2025, but she has committed to remaining on board to assist with the search for her successor. These are the recent developments that investors should be aware of.


InvestingPro Insights


As Salesforce (NYSE:CRM) embarks on its strategic acquisition of Own Company, the financial metrics and market sentiment reflected in real-time InvestingPro data further underscore the company's robust market position. With a substantial market capitalization of $235.29 billion, Salesforce demonstrates significant industry presence. The company's impressive gross profit margins, reported at 76.35% over the last twelve months as of Q2 2025, highlight its efficiency and strong pricing power. Additionally, Salesforce's P/E ratio stands at 42.3, which, when adjusted for near-term earnings growth, presents a lower figure of 39.05, suggesting that the company may be trading at a reasonable valuation relative to its growth prospects.


InvestingPro Tips reveal that Salesforce has a perfect Piotroski Score of 9, indicating a very healthy financial state, and that management has been aggressively buying back shares, a signal of confidence in the company's value. Furthermore, with 23 analysts having revised their earnings upwards for the upcoming period, there is a consensus that Salesforce's financial performance is on an upward trajectory. For readers interested in deeper analysis, there are over 13 additional InvestingPro Tips available, offering nuanced insights into Salesforce's market dynamics and investment potential.


These data points and expert insights from InvestingPro reinforce the optimistic outlook from Mizuho Securities, painting a picture of a company that is not only expanding its technological capabilities through acquisitions but also maintaining strong financial health and market confidence.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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