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While the talks about the deal between Salesforce and Slack are gaining momentum, Jim Cramer believes that it could be a very beneficial move for Salesforce.
Former hedge fund manager and CNBC’s ‘Mad Money’ host Jim Cramer said on Thursday that Salesforce.com Inc (NYSE: CRM) could more than double in market valuation after the company acquired Slack Technologies Inc (NYSE: WORK) for a whopping $27.7 billion.
Cramer is said to have a stake in the American cloud-based software company, Salesforce. Notably, he thinks that the decision to acquire Slack was brilliant for Salesforce’s future growth prospects.
“If you follow the customer, you’ll understand why Salesforce.com, which built a gigantic business by helping clients harness the power of the cloud, decided to shell out $27.7 billion for Slack Technologies in a deal that was widely criticized. I think it was a brilliant move, though,” he explained.
According to Cramer, the company needs to be in the limelight for its valuation to rise organically. Particularly since the company is not visible on many platforms where everyone can view and analyze it for investment.
“Salesforce.com has grown to be a $200 billion Dow Jones colossus under the leadership of Marc Benioff,” Cramer said. “But thanks to the law of large numbers … it’s very difficult for Marc to go from $200 billion to the $500 billion that I think that company can go, at least not organically.”
Salesforce Market Fundamentals amid Talks on Its Deal with Slack
Salesforce’s core business faces fierce competition from the Microsoft cloud business. Therefore prudent for the company to invest more in different companies that will make its services more competitive in the market.
Previously, Salesforce purchased Tableau – a data visualization company- for $15.3 billion. However, the largest acquisition remains the slack one since it brings onboard over 130,000 paid customers that will bolster its portfolio.
With its core services essential to oversee the recovery of the global economy, Salesforce has tremendously grown year to date. Its growth prospects were not downplayed by the market as it was added to the Dow Jones in late August. Notably, it was chosen over two other trillion-dollar companies, Amazon.com Inc (NASDAQ: AMZN) and Google parent company Alphabet Inc (NASDAQ: GOOGL). This was primarily because the Dow ranks its holdings by share price and not market value.
Additionally, Salesforce’s entrance to the Dow index will help it maintain 25% weighting to pure tech stocks.
Salesforce has a market capitalization of around $202.09 billion with 915.35 million outstanding shares. According to the data by MarketWatch, Salesforce has been rated 44 times and has received an average of ‘Buy’ rating. However, its shares have dropped approximately 16.62%,15.08%, and 10.47% in the past three months, one month and five days respectively. Year-to-date, salesforce shares are up approximately 35.86%.