Loop Capital holds Salesforce stock at $300 target following deal

On Wednesday, Loop Capital Markets maintained a Hold rating on Salesforce.com (NYSE:CRM) stock, with a steady price target of $300. The prominent software industry player, which boasts impressive gross profit margins of 77.2%, recently announced its intention to acquire data management firm Informatica in a deal valued at $8 billion in equity value, factoring in Salesforce’s existing investment in Informatica. Shareholders of Informatica are set to receive $25 in cash per share. According to InvestingPro data, Salesforce maintains a healthy financial position with a "GOOD" overall health score and operates with a moderate level of debt.

According to Loop Capital’s analysis, the transaction assigns Informatica a calendar year 2025 enterprise value to sales (EV/S) multiple of 6x and an EV to free cash flow (EV/FCF) multiple of 22x, which is considered fair and reasonable by the firm. Informatica’s current annual revenue of approximately $1.7 billion accounts for about 4% of Salesforce’s total revenue of $37.9 billion. The acquisition is not expected to negatively affect Salesforce’s current revenue growth rate of 8.7%, as reported in InvestingPro’s latest financial analysis.

Informatica’s non-GAAP operating margin currently stands at 33%, compared to the Street’s fiscal year 2027 estimate of 35%. Loop Capital anticipates that the acquisition will be margin-accretive for Salesforce due to expected cost synergies. The deal is projected to be finalized early in Salesforce’s fiscal year 2027.

The acquisition is seen as a strategic fit for Salesforce, enhancing its existing Data Cloud platform by providing access to on-premises data and attracting an established customer base that might continue investing in Informatica’s new cloud offerings as part of Salesforce. Loop Capital also speculates whether this move could signal Salesforce’s intent to pursue the larger cloud data warehousing market by leveraging its customer data platform, rather than transferring data to other vendors.

Loop Capital deems the acquisition value as fairly priced, anticipating it to contribute positively to Salesforce’s margins, earnings, and cash flow, with the potential for a modest increase in sales. Salesforce is set to report its first-quarter results later today, May 28th, after the market closes. InvestingPro analysis suggests the stock is currently trading below its Fair Value, with analysts maintaining a bullish consensus. For deeper insights into Salesforce’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers, along with 10+ additional ProTips and extensive financial metrics.

In other recent news, Salesforce has announced its intention to acquire Informatica for an equity value of approximately $8 billion, with Informatica stockholders receiving $25 in cash per share. This acquisition has already gained approval from both companies’ boards and a significant portion of Informatica’s voting power, indicating a strong likelihood of completion. Truist Securities has responded by downgrading Informatica from Buy to Hold, although it raised the price target to $25, aligning with the acquisition offer. Meanwhile, Canaccord Genuity has reduced Salesforce’s stock target to $350 while maintaining a Buy rating, reflecting the strategic importance of this acquisition for Salesforce.

DA Davidson maintains a Neutral rating on Informatica, citing potential challenges despite its inclusion in their STAMPEDE list for special situation investment ideas. The firm also reaffirmed an Underperform rating for Salesforce, expressing concerns about integrating Informatica’s operations and technology. Conversely, Mizuho (NYSE:MFG) Securities continues to support Salesforce with an Outperform rating, despite unrelated challenges in a clinical program. These developments highlight the strategic maneuvers and varied analyst perspectives surrounding the Salesforce and Informatica deal.

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