However, Canaccord top analyst Richard Davis is not yet convinced on the business logic of a CRM-TWTR combination. The analyst believes that the functionality, business model and customer base seems fairly orthogonal to Salesforce’s core operations.
Davis noted, “Pending a good explanation, we are somewhat skeptical that a rumored Salesforce-Twitter merger would be favorably transformative for Salesforce. We do not change ratings based on speculation, but we are publishing this note to explain to investors our preliminary thinking.”
“On a financial basis, it looks like a $26-27 per share purchase price for TWTR would be accretive if financed with all debt and less so if paid for with stock,” the analyst added.
The analyst remains bullish on CRM long-term, but “acknowledge that this kind of noise probably makes CRM range bound in the very short term.” Davis concluded, “Our long-term thesis at this point is intact that Salesforce has a long-tail opportunity that could see the firm’s revenue and stock price double over a 4-5 year period.”
As such, Davis reiterated a Buy rating on shares of Salesforce, with a price target of $95, which implies an upside of 35% from current levels.
As usual, we like to include the analyst’s trackrecord when reporting on new analyst notes. According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, 5-star analyst Richard Davis has a yearly average return of 10.7% and a 62% success rate. Davis has a 15% average return when recommending CRM, and is ranked #62 out of 4189 analysts.