Why is this stock down 6%? What we have today is a large long term shareholder saying good bye to a long term friend. It’s over. The fact that Marc Benioff sounded forlorn and the fact that they are not going to break out Exact Target anymore spooked this shareholder. This shareholder likely has been following this company for about a decade, like I have, and they noticed that Marc did not sound his usual peppy self. It was a huge tone change. Also without the Exact Target acquisition, which they said they are no longer disclosing, the organic growth most definitely decelerated. My friends on the buy side tell me that the sell side does not understand the price move today. They should because they get paid big bucks to figure out this kind of change on the margin.
We now have another Marquee Tech name that is slowing. The multiple is too high and now they need acquisitions to grow. The problem with that is their stock currency to buy is weakening. The growth stock price reflexivity dynamic is now in reverse action here. This is now a short the rally name. Their 30% growth rate guidance is a fantasy and the seller today knows that. No need to stick around and wait for the company to give up the ghost of growth because when they do the stock will be much lower.
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well elucidated … danke
I love it when you speak bear to me.
BlueStar, what implications do you think this may have on WDAY/NOW/N?
All those companies are smaller and likely have more room to grow however their valuations are very high. I would avoid on the long side until valuations become more reasonable. FYI reasonable is a lot lower.
Care to comment on today’s CRM action?
Most of the beaten down growth stocks ripped yesterday. Notice I said this a short the rally story. Long term this is going lower. When I wrote the first article on CRM I did not expect it to go lower off of earnings. Clearly someone big was liquidating on Wednesday. This stock may drift higher but remember the forest for the trees.
now they need acquisitions to grow
That’s been the case for the last two years minimum but now it’s finally catching up. Also, that weakening currency errrr stock price puts a big hit on the stock compensation part of cash flow that has been artificially inflating things for so long already.
Great blog, love your stuff.
Enjoyed your posts.
Po Pimp and Roster man
Thanks for the feedback.