Salesforce.com’s Stock is Priced for Perfection

At Salesforce.com’s Dreamforce conference this past week there were a number of hot topics like cloud computing, social media marketing management (a.k.a. the marketing cloud), and big data. One item I heard discussed on the show floor was Salesforce.com’s meteoric stock price and market cap. When I asked further about the stock price to one attendee, he described it as “being priced for perfection.” Having not heard that phrase before, I asked what it meant. Simply put, it means that the price is so high that there’s no room for error and Salesforce.com must keep exceeding analyst’s expectations. If Salesforce.com misses analyst’s growth, revenue, and earnings expectations in a quarter, expect a large correction in stock price.

Here are some of the numbers for Salesforce.com now, as of September 22, 2012, from Google Finance for NYSE:CRM:

  • Market cap: $21.57 billion
  • Stock price: 155.20
  • Cash on hand: $1 billion
  • Total current assets: $1.85 billion
  • Total debt: $508 million
  • Last quarter’s revenue: $731 million
  • Run rate based on last quarter’s revenue: $2.92 billion
  • Enterprise value: ~$21.07 billion
  • Revenue run rate multiple: ~7x

A revenue run rate top line multiple of 7x is incredible for any company, but especially so with a company that has 8,765 employees. Salesforce.com’s stock is priced for perfection and I hope they continue to exceed expectations.

What else? What are your thoughts on Salesforce.com and their stock being priced for perfection?

One thought on “Salesforce.com’s Stock is Priced for Perfection

  1. I agree. Salesforce.com can’t afford any missteps or it could easily take a tumble like NFLX. Even though the Internet seems to prefer one gorilla, Salesforce.com doesn’t deliver profitable returns to shareholders, and if GOOG ever decides to come after them, they are in big trouble.

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