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Salesforce (CRM) tumbles 7% on $27.7bn Slack (WORK) deal
Salesforce (CRM) delivered fiscal Q3 beats in midweek.
Still, its confirmation of a $27.7bn deal to buy Slack Technologies (WORK) resulted in a 7.22% drop in shares during Wednesday’s trading.
After Tuesday’s close, Salesforce posted $1.15 earnings per share and $5.42bn revenue versus the $0.75 and $5.25bn Wall Street consensus.
However, the strong showing was overshadowed by the software company’s announcement of intent to acquire Slack in what will be its largest-ever acquisition.
Oppenheimer analyst Brian Schwartz said that the M&A distraction, coupled with a “challenging selling environment”, is likely to concern investors in the near term.
He added: “We believe long-term investors need to own the stock because of a large [total addressable market], leadership positioning, and predictability.”
Barclays analyst Raimo Lenschow believes that the current “bear arguments” are unlikely to hold “once the dust settles”.
However, he did shave $41 off a new, lower $276 price target and continued with an overweight rating.
Citi’s Walter Pritchard is not as optimistic after downgrading Salesforce’s rating to neutral and pivoting from a $300 to $250 PT.
Salesforce CEO Marc Benioff talked up the deal in a statement on Wednesday, claiming that it will be a “match made in heaven”.
Benioff believes that Salesforce and Slack can improve enterprise software and transform the new all-digital way of working.
Wedbush analyst Daniel Ives believes that Salesforce’s desire to keep pace with Microsoft was central to the deal.
Investors are not convinced at the moment though, as CRM stock slumped 7.41% to $224.45 on the New York Stock Exchange on Wednesday.
Slack shares also retreated 1.55% to $43.15 on the same day.
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