CRM Stock Has Big Upside
Salesforce.com Inc. (NYSE:CRM) is a company on the move. Salesforce.com stock has not yet reflected the company’s buoyant form. But if, as the top tech headlines over the past few months suggest, Salesforce.com is itching for growth and development. Eventually, it will grab the one property that will set it apart from its peers.
In recent weeks, Salesforce has made bids for LinkedIn Corp (NYSE:LNKD). The company has complained about potential antitrust problems with Microsoft Corporation’s (NASDAQ:MSFT) bid. Salesforce.com stock has suffered, perhaps, because of its missed opportunity. But the company moved on and has been rumored to be making a bid for Twitter Inc (NYSE:TWTR).
The names hovering around Twitter now include the likes of Google, otherwise known as Alphabet Inc (NASDAQ:GOOG). But Salesforce.com is hungry for growth. While some of the buyers buzzing around Twitter could face scrutiny from antitrust authorities in the U.S., and even more so in the European Union, Salesforce.com is not wasting any time; it’s already eyeing other growth opportunities, this time succeeding.
Salesforce.com shares have started to reflect the frenzy of growth-boosting efforts. CRM stock has gained 3.28% in the past five days. But the potential exists for more significant gains, which could see CRM stock get close to—or even exceed— its record $82.00/share level. The company has decided to throw its name in the ring to gain a big piece of the artificial intelligence (AI) sector.
Salesforce.com Buys Krux: Here’s What it Means for Growth
Salesforce.com has just announced that it will buy Krux Digital Inc. for $340.0 million in cash plus shares. (Source: “To beef up in marketing, Salesforce will buy Krux for $340M in cash, up to $750M overall,” TechCrunch, October 4, 2016.)
That deal allows Salesforce.com to gain access to Krux’s data management platform (DMP), which has already been integrated for several months with its own marketing cloud.
While seeking to block Microsoft’s takeover of LinkedIn, and still being interested in Twitter (rumors that it has refused to comment on, as happens in these cases), Salesforce’s announcement about Krux came just hours before the start of Salesforce’s annual Dreamforce conference in San Francisco.
Krux, to summarize what it does, allows sellers and customers to increase the number of ways they can interact. After the acquisition is complete, Krux will be a wholly owned subsidiary of Salesforce, according to a company statement. Essentially, through Krux’s cloud-based DMP platform, users can develop a much better idea of who their customers are. (Source: Ibid.)
So valuable is the service that Salesforce’s boss, Marc Benioff, decided to buy Krux outright. Krux has many large clients in the United States and beyond, including major car manufacturers such as Peugeot in France. Even Kellogg Company (NYSE:K) and Time Warner Inc (NYSE:TWX) are clients.
Krux’s DMP “Intelligent Marketing Hub” collects data from Internet users from multiple sources, hence Salesforce.com’s interest in Twitter. It identifies and processes individual preferences, exploiting them through various channels in real time.
Companies can increase the effectiveness of their marketing campaigns. Krux’s hub makes brands more profitable, hence the acquisition will add more revenue to Salesforce.com’s coffers.
How Does All this Enhance Salesforce.com Stock’s Potential?
As for Salesforce.com stock’s potential, the Krux acquisition has increased its value to more than the sum of the two parts (i.e. Salesforce and Krux). Now Salesforce can aggregate the combined artificial intelligence tools that it has developed, along with Krux’s, enhancing its cloud service. Krux also has a useful marketing database to enrich the available information on customer profiles. Apart from that, Salesforce.com has just gained many more customers.
All this speaks volumes about Salesforce’s reasoning behind its interest in Twitter. It also suggests that the company won’t let Twitter slip away. With Krux— and potentially Twitter—under its umbrella, Salesforce could end up having its own social log-in platform to track login data, like Facebook Inc (NASDAQ:FB), as it happens.
So, while some investors were worried by the reasoning behind Salesforce’s Twitter ambitions, which may have contributed to the slowing down of CRM stock, there is much logic to the apparent madness.
Last September, Salesforce posted strong quarterly results. Revenues rose some 25% and earnings matched that growth at 26%. There was only one problem; billings did not grow as projected: 15% instead of 25%. But Salesforce revised its guidance upward for the full fiscal 2016.
The cloud and its expansion among all users demands that cloud-focused companies like Salesforce keep growing. Salesforce has gone on a shopping binge in 2016, with $4.0 billion in acquisitions and counting. There is a strategy behind the company’s “buy it now” approach, and it’s all geared to boost revenues and earnings. That’s why CRM stock should hit new highs before the end of 2016, reaching toward $90.00 per share and beyond.