Salesforce shares 'compelling' amid overblown M&A fears, analyst says

With Salesforce (CRM) shares under pressure in recent months after the company's acquisition of Demandware (DWRE) and unsuccessful bidding war with Microsoft (MSFT) for LinkedIn (LNKD), Wedbush analyst Steve Koenig said Thursday that the stock now offers a "compelling" entry point. The analyst explains that the M&A moves have spurred fears that Salesforce is hunting for ways to artificially sustain growth amid potential organic sales deceleration, but Koenig believes its motivation in both cases was strategically driven. Notably, Koenig isn't seeing any signs of a secular or cyclical slowing in Salesforce business, as his conversations with a "handful" of Salesforce partners "point to larger deal sizes and more complex implementations, not to any negative inflection in business." Second-quarter results across Wedbush's coverage universe "don't point to any pronounced cyclical slowdown in enterprise demand" and, separately, his conversations with partners and customer Chief Information Officers "highlight the potential for Salesforce to do something bigger in the human capital management space." The analyst expects a "solid" Q2 beat and full-year revenue raise for Salesforce, leading him to reiterate his Outperform rating and $98 price target. The company is slated to report results on August 31. PRICE ACTION: Shares of Salesforce rose 3% to $80.16 Thursday, outpacing the market's broader move lower.