Goldman cuts software-as-a-service darling Salesforce.com (CRM) to SELL, citing valuation and macro-spending deterioration. In doing so, it throws a pie in the face of one of the Valley’s most overtly gung-ho CEOs (Marc Benioff).
The stock is trading at 50X the firm’s 2008 EPS estimate, which doesn’t strike us as a shockingly high multiple for a recurring-revenue market leader in the sweet-spot of the next big enterprise software trend–certainly not high enough to safely bet on multiple compression in the absence of deteriorating fundamentals.
As a “risk” to this call, Goldman does note that market leaders usually command premium valuations and that at some point someone (e.g., Oracle or SAP) might decide to buy Salesforce.com.
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