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CRM At 40X Opertating Cash Flow, Price Target Of 101$. 40X Cash Is A Huge Multiple And Still Downside!

|Includes: Salesforce.com, Inc. (CRM)

Using real operating cash flow: excluding cash received for shares issued, and related tax effect; including deferred commission cashflow; subtracting real capex on servers, furniture etc (there's more for acquisitions but not a certain figure given a voracious acquisitive appetite):

Here's my spreadsheet.

Note fully diluted shares outstanding are now 149m, up by 14m in 1 year;

Table lets you impute a cashflow multiple, add back net cash on balance sheet.

I assume cashflow growth of 35% for f13 to jan13.

                       
Cashflow for yr to jan12   368     ""=591-229+6   excluding shares sold and tax effect
less capex     91     capex ex acqtn        
Net cashflow     277                
Grow at 35% 35%   373.95                
                       
What multiple? 15X 20X 25X 30X 40X            
Value 5609.25 7479 9348.75 11218.5 14958            
Cash 777 777 777 777 777 cash + mkt securities less conv debtas at jan 2012    
                       
Total value 6386.25 8256 10125.75 11995.5 15735            
                       
Per share                      
149 42.9 55.4 68 81 106   for 2011 sh 136 m, then moved to 149m!! For f13  
                     

To summarise table below, a 40X operating cashflow multiple delivers a price target of 106$. 40x is ludicrously generous.

I prefer a 30X and this delivers a price target is $81

In other words, even after the slide on Thursday May 10th, there is ample downside risk once cloudy euphoric dreams are replaced with a dose of reality.

Disc: short and relieved!!

Disclosure: I am short CRM.