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Salesforce Can Lift Stock With Integration Focus - Jefferies

Salesforce could unlock value by pressing pause on M&A and marketing outlays and focusing on integration, a key industry analyst says.
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Salesforce  (CRM)  can boost its stock performance by pressing pause on its M&A  activity and focusing on integration, a key industry analyst argues. 

Jefferies analyst Brent Thill raised his price target on the San Francisco provider of customer-relationship-management software to $220 a share from $205.  

He affirmed a buy rating on the stock, which is valued at just 8.1 times forward earnings, even after it rose nearly 10% over the past three months. 

The stock has underperformed on year-to-date, one-year and five-year bases, the analyst said. It has sharply lagged rival Adobe  (ADBE) on a five year basis, he said.

Salesforce shares at last check were up 0.9% at $188.53.

"We believe we saw a meaningful acceleration in M&A in 2019, and CRM needs to take a breather to digest the Tableau deal, the biggest one so far," Thill said. 

Last August Salesforce closed the purchase of the Seattle analytics platform for a reported $15.7 billion. 

"CRM needs to make sure the integration between the various clouds is seamless before embarking on more M&A," Thill said. 

Salesforce could do more to deliver profitability given its scale, as it continues to spend more than its peers do to support go-to-market projects, the analyst wrote. 

Jefferies estimates that Salesforce spends about 40% of sales on sales and marketing efforts, compared with 26.6% as the median expense.

"We continue to be positive on CRM and believe there is ample value to unlock," he said. "[The long-term] pipeline is robust. We also believe covid-19 has been accelerator driving more businesses to the cloud,  which should benefit CRM."

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