Dirkyp

Salesforce.com Unlikely to Sustain Its Current High Multiple

Also note that Goldman has CRM on its conviction sell list with a $21 target price - that won't help. The short interest is going up, and the open interest on the put options is very large - have a look at the May 2009 17.50 put options - 9,064 contracts outstanding and they are trading at 1.70 which means people are paying 1.70 for puts at these levels need the stock to drop in half by May before they make money.

To me it looks like, regardless of the merits, the hedge funds are piling on short positions and may target CRM as their next meal . 62x FY Jan 2010 earnings is VERY rich, and that's IF they manage to grow earning 60%+ in the worst economy in a generation.

1/3 of CRM's business is from small businesses and spending may grind to a halt there.

Great company but way overpriced in my view - what is the upside from here? Say they do hit the numbers and grow earnings by 60% in a brutal economy, fight off competition and price cuts from Oracle/Netsuite, etc. then they are still trading at 62x those earnings. So maybe it could go to $40?? But the downside is probably $10, so I think there are way better risk-adjusted bets out there. Somehow buying something like Intel (just to use an example) at 4.5x EBITDA seems like a better risk adjusted bet.

By the way I am short, for full disclosure.