3 Reasons The Market Is Undervaluing Salesforce

JPMorgan said in a research note on Monday that the market is undervaluing salesforce.com, inc. CRM, which it terms as the most valuable cloud asset.

Analyst Mark Murphy said conversations with more than a dozen industry contacts reinforce his confidence in the favorable long-term outlook for the company. The positive opinion is premised on a trio of factors.

Demand Going From Strength To Strength

JPMorgan noted that partners see no sense of a drop in demand, with some even suggesting tremendous traction. The partners estimate an ongoing 20–30 percent growth trajectory, the firm noted.

Einstein Feedback Positive

The firm also stated that feedback on the company's news AI product "Einstein" is positive. This, according to the firm, will give salesforce.com controlling interest in some really interesting data.

Related Link: Twitter Keeps Fluttering As More Bidders Lose Interest

Lightning Bolt = Bright

JPMorgan also highlighted the stronger than expected demand for Lightning Bolt and the combination of communities and demandware.

Entry Point

The firm sees the weakness created by the soft fiscal second quarter and a potentially expensive acquisition of Twitter Inc TWTR as an opportune entry point. JP Morgan expects the overhangs to fade away with a better pace of business in the third and fourth quarters and an eventual departure from the current Twitter discussion.

Rating, Price Target Reiterated

While noting that salesforce.com is trading near the bottom of its typical trading range of 5–8x of EV/sales, JPMorgan said it believes its long-term thesis that the company is one of the rare cloud assets with a multi-product success story and a long-term share gainer remains intact.

As such, the firm reiterated its Overweight ratings and $95 price target on the shares of the company.

At the time of writing, the shares of salesforce.com were up 6.07 percent at $75.19.

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