Fannie Mae, Freddie Mac shares tumble after conservatorship comments
On Wednesday, Morgan Stanley (NYSE:MS) maintained its Overweight rating and $393.00 price target for Salesforce.com (NYSE:CRM) stock, which currently trades at $277.19. According to InvestingPro data, analysts maintain a bullish consensus with price targets ranging from $200 to $442, reflecting the market’s confidence in this prominent software industry player. The firm’s analyst commented on the company’s recent acquisition of Informatica, noting that although the deal may not have been what the market expected, its terms are seen as favorable. Salesforce announced the agreement to acquire Informatica for approximately $8 billion in equity value, a figure more favorable than the $12 billion valuation previously rumored. With impressive gross profit margins of 77.19% and a healthy financial position indicated by InvestingPro’s "GOOD" overall health score, Salesforce appears well-positioned to integrate this acquisition.
The acquisition’s price, at roughly 5 times next twelve months (NTM) sales and 14 times NTM free cash flow (FCF), is considered more favorable than last year’s speculation of a 7 times NTM sales and 22 times NTM FCF deal. The analyst acknowledges that Informatica’s legacy, largely on-premise data assets, may not align with investors’ expectations for Salesforce’s growth trajectory. However, the capabilities Informatica brings in data management, integration, governance, and security could enhance Salesforce’s Data Cloud and support the Agentforce platform.
Despite potential concerns about the strategic fit of Informatica and the risk of distraction, Morgan Stanley points out that the deal terms are advantageous and that the acquisition is expected to be accretive to Salesforce’s operating margins, earnings per share (EPS), and FCF in FY28 (CY27), driven by significant cost synergies. Furthermore, Salesforce’s stock is currently trading at a discount compared to its peers, at approximately 17 times EV/CY26 FCF, while the Large-Cap Software (ETR:SOWGn) group trades at around 29 times. The company’s strong financial performance is evident in its $37.9 billion revenue over the last twelve months and robust free cash flow of $12.4 billion.
The analyst suggests that the discounted valuation of Salesforce’s shares, along with the accretive nature of the Informatica deal, limits downside risk. Despite ongoing debates about the acquisition’s strategic value and the potential for distraction, the terms of the deal are seen as a cap on the materialization of bear concerns. According to InvestingPro analysis, Salesforce appears undervalued at current levels, with additional insights available in the comprehensive Pro Research Report, which provides deep-dive analysis of this and 1,400+ other top US stocks.
In other recent news, Salesforce has announced its intention to acquire Informatica in a deal valued at $8 billion, with shareholders of Informatica set to receive $25 in cash per share. This acquisition is expected to enhance Salesforce’s Data Cloud platform and is anticipated to be margin-accretive due to cost synergies. Analysts from Loop Capital maintain a Hold rating on Salesforce with a $300 target, noting the acquisition’s potential to positively impact margins, earnings, and cash flow. Meanwhile, Truist Securities downgraded Informatica from Buy to Hold, raising its price target to $25, reflecting the acquisition’s perceived benefits for Informatica shareholders.
Canaccord Genuity has adjusted its price target for Salesforce to $350, maintaining a Buy rating, and highlighted that the acquisition will not affect Salesforce’s capital return program. DA Davidson remains cautious, maintaining a Neutral rating on Informatica with an $18 target, and an Underperform rating on Salesforce with a $200 target, expressing concerns over Informatica’s execution and technology. The acquisition, which is expected to close in early fiscal year 2027 for Salesforce, aligns with its strategy of enhancing data management capabilities, following previous acquisitions like MuleSoft and Tableau. The transaction is still subject to regulatory approvals and customary closing conditions, with Salesforce planning to finance it through available cash and new debt.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.