NEW YORK (TheStreet) -- Shares of Salesforce.com (CRM - Get Report) were gaining 3.5% to $74.07 Tuesday following a report that Microsoft (MSFT) is exploring a potential bid for the cloud services company.
Microsoft isn't in talks with Salesforce yet, and no deal is imminent, according to Bloomberg. Reports of another company talking to Salesforce as recently as April reportedly drove Microsoft to consider a bid for the company, according to the news service.
Salesforce is reportedly working with two investment banks to figure out its response to approaches from potential bidders. The company's options include rebuffing offers and working out a sale with the bidders.
TheStreet's Jim Cramer, portfolio manager of the Action Alerts PLUS Charitable Trust had this to say: "Marc [Salesforce Founder, Chairman, and CEO Marc Benioff] has repeatedly told me he won't comment because he can't comment and I have to take him as his word and not rumor-monger."
Salesforce currently has a market value of $47 billion.
About 11.5 million shares of Salesforce were traded by 3:20 p.m. Tuesday following the report, above the company's average trading volume of about 4.8 million shares a day.
TheStreet Ratings team rates SALESFORCE.COM INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate SALESFORCE.COM INC (CRM) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and increase in net income. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 0.6%. Since the same quarter one year prior, revenues rose by 26.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Powered by its strong earnings growth of 47.36% and other important driving factors, this stock has surged by 40.98% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- SALESFORCE.COM INC has improved earnings per share by 47.4% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SALESFORCE.COM INC reported poor results of -$0.42 versus -$0.40 in the prior year. This year, the market expects an improvement in earnings ($0.69 versus -$0.42).
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Software industry and the overall market, SALESFORCE.COM INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Despite currently having a low debt-to-equity ratio of 0.38, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that CRM's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.66 is low and demonstrates weak liquidity.
- You can view the full analysis from the report here: CRM Ratings Report