Author Topic: CRM - Salesforce.com  (Read 50533 times)

nkp007

  • Hero Member
  • *****
  • Posts: 562
CRM - Salesforce.com
« on: May 10, 2012, 10:29:37 AM »
I can't be the only one who loves this company right? The cloud...leveraging social networking...synergies. It's definitely a worth triple what it's trading at!

Just kidding, I've been shorting it for months. I was introduced to the idea when I heard Whitney Tilson talking about it. Do a quick google search and you'll see the many cases against it.

http://video.cnbc.com/gallery/?video=3000053521

The main factors
-No GAAP earnings. Even with their "adjusted" earnings, CRM is trading at a ridiculous 100x multiple

-Insiders executing (and selling) their stock options years before expiry. Check out Todd Sullivan's twitter feed for the play by play.

-The CEO is sketchy.com. I have watched numerous presentations and truly have no idea what's going on. It is buzzwords galore. They talk about how the cloud is reinvigorating everything and how social networking changes everything.

But ultimately, I don't understand why their product is that unique and why Microsoft / whoever can't wipe the floor with them. http://www.youtube.com/watch?v=c4WbbCOHKBs&list=PL81C9FAB11DCA2FFE&index=1&feature=plcp

I could be dumb and just not get it.

-They bought some really nice land near San Francisco for a lot of money. They wanted to build a campus, but recently decided to freeze those plans because they were "growing too fast". In reality, I think it is because they're facing a cash crunch and don't want to stress the coffers

What do you guys think it's worth? I have no clue, but probably a lot less than where it is today. There are risks (someone acquiring them - if Instagram can sell for a billion...), but this thing smells in a few different ways. I decided to short it (significantly cheaper than the puts) with a cost basis ~$130


oddballstocks

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 2258
    • Oddball Stocks Blog
Re: CRM - Salesforce.com
« Reply #1 on: May 10, 2012, 10:55:40 AM »
I think the key is you really need to understand the product and the value proposition.  I'm not short or long, but have a good amount of professional exposure.  Companies we work with LOVE it, it's a very easy sell and changes businesses. 

As for growth a friend of mine works for a CRM practice at a major consulting firm, the practice didn't exist two years ago, they'll be doing over $100m this year I believe.  So yes, growth is there, clients love it, there is a big niche factor here.  CRM and MSFT products aren't really comparable, maybe at a summary level investment thesis they are, but at the client level I've never seen them pitched against each other it just doesn't make sense.

I don't know if 100x is overvalued or what, but there is some real world value here, as for an investment no idea.  I do know the product is completely changing the business landscape.  One key I've seen over and over is the buy decision is with a business person not an IT person, this is key.  A dept manager can buy CRM without any IT involvement, no servers, nothing.  Think of this as those pet projects built in Excel on steroids.
The ultimate edge for bank investors: http://www.completebankdata.com

nkp007

  • Hero Member
  • *****
  • Posts: 562
Re: CRM - Salesforce.com
« Reply #2 on: May 10, 2012, 11:16:32 AM »
I think the key is you really need to understand the product and the value proposition.  I'm not short or long, but have a good amount of professional exposure.  Companies we work with LOVE it, it's a very easy sell and changes businesses. 

As for growth a friend of mine works for a CRM practice at a major consulting firm, the practice didn't exist two years ago, they'll be doing over $100m this year I believe.  So yes, growth is there, clients love it, there is a big niche factor here.  CRM and MSFT products aren't really comparable, maybe at a summary level investment thesis they are, but at the client level I've never seen them pitched against each other it just doesn't make sense.

I don't know if 100x is overvalued or what, but there is some real world value here, as for an investment no idea.  I do know the product is completely changing the business landscape.  One key I've seen over and over is the buy decision is with a business person not an IT person, this is key.  A dept manager can buy CRM without any IT involvement, no servers, nothing.  Think of this as those pet projects built in Excel on steroids.

Very, very helpful. Thanks.

keerthiprasad

  • Lifetime Member
  • Full Member
  • *****
  • Posts: 147
Re: CRM - Salesforce.com
« Reply #3 on: May 10, 2012, 02:17:35 PM »
The clients are extremely loyal.  As far as I know, the switching costs are typically high (not an easy transition to a competitor).  In a previous job, we used salesforce even though there was a competitor offering a similar service 70% less.  The head of sales would have burned the company down before letting us buy anything else. 

But the valuation is definitely ridiculous and management sells a lot of shares...

Keerthi

DCG

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 1577
    • Venture Blend
Re: CRM - Salesforce.com
« Reply #4 on: May 10, 2012, 02:23:12 PM »
I like the company, and like Marc Benioff (his book 'Behind the Cloud' is a very good read), but don't like the valuation.

Eric50

  • Lifetime Member
  • Full Member
  • *****
  • Posts: 216
Re: CRM - Salesforce.com
« Reply #5 on: May 10, 2012, 10:44:14 PM »
nkp007 - Is there a catalyst in the near term?

nkp007

  • Hero Member
  • *****
  • Posts: 562
Re: CRM - Salesforce.com
« Reply #6 on: May 11, 2012, 01:56:32 AM »
nkp007 - Is there a catalyst in the near term?

My guess is that each earnings call is a potential catalyst given that expectations are so high. Any sign of less growth, less bookings growth, or heightened competition may spook analysts enough to the point where they make "adjustments" to their models.

If that's the case, who knows what happens next. If a model somehow values this thing at $160 or $180 as some do (on no GAAP earnings), I can only imagine what a small adjustment will do.

ItsAValueTrap

  • Hero Member
  • *****
  • Posts: 1945
    • Blog
Re: CRM - Salesforce.com
« Reply #7 on: October 31, 2012, 10:45:36 PM »
Ok I'm going to bump this thread.  The puts look cheap-ish here... implied volatility is in the low 40s.  (JOE puts are even cheaper, but that's another story.)

They are reporting GAAP losses, so this may no longer become one of those momo stocks that take several years to crumble.  On the other hand, they do have good cash flow because they pay out all that stock-based compensation.  They really know what they are doing.
"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price. " -Buffett

my blog

HJ

  • Sr. Member
  • ****
  • Posts: 455
Re: CRM - Salesforce.com
« Reply #8 on: November 01, 2012, 07:00:18 AM »
And then there is the report that recently they've laid off quite a bit of people from Rdian 6 and Buddy Media, 2 acquisitions that they spent a combined almost $1 billion on.  It's the first sign of potential operational issue that I've seen coming out of the company.  But the stock trades in mysterious ways.

rimm_never_sleeps

  • Guest
Re: CRM - Salesforce.com
« Reply #9 on: November 01, 2012, 10:36:26 AM »
unless it's a fraud they aren't facing any kind of cash crunch. they produce free cash flow and have over $1b of net cash on the balance sheet. so if your thesis is they have a cash crunch I don't see it. having said that I believe it's overvalued as a business. But as long as we keep printing money I don't really see a catalyst. overvaluation can be it's own catalyst, however. For shorts I would look closely at the recent list of tech and "cloud" IPOs.