No matter the climate on Wall Street there’s always some action somewhere.
The latest action featured at center ring is the Hewlett-Packard (NYSE: HPQ) versus Dell (Nasdaq: DELL) slug fest over 3Par (NYSE: PAR). 3Par investors appear to have hit it big, with 200% gains expected for these lucky stockholders when all is done. Not a bad score in a sluggish market, or in any market for that matter.
At a time when most other markets have been shrinking due to broken credit markets, cloud computing stands out as one possible avenue for investors thirsting for the days of some good ol’ capital appreciation.
Investors too late to the 3Par party but still pin their hopes on other stocks in the space, such as Salesforce.com (NYSE: CRM) may be too late as well.
Salesforce.com provides clients cloud computing, services, applications and data storage over the Net. It’s a pure play for investors wanting a piece of the major shift away from the mainframe to client-server model and toward the cloud model.
Early investors of CRM have fared remarkably well, with 50.6% year-to-date gains, 113.4% year-over-year, and a 479% return over the past five years. Not surprisingly so, as the sector’s growth rate of 28% per year could reach a $126 billion market by 2012, according to IBM. And CRM is in the thick of it.
Early investors of CRM have fared remarkably well, with 50.6% year-to-date gains, 113.4% year-over-year, and a 479% return over the past five years—compared with
declines most everywhere else.
But is the stock getting ahead of itself?
Maybe so. With a forward P/E of 73.3 and a PEG of 3.4, the stock is quite expensive, and could already reflect the full pricing of a company which actually makes money (3Par does not) and could benefit from a buyout as well. CRM could be one of those sell on the news and buy it back when the fire under the stock (and the space) is turned down a notch or two.
The chart of CRM (see below) shows the stock on quite a steep trajectory in price. Friday’s closing price settled above the top Bollinger Band, suggesting a retreat, at least, back to its Bollinger Band average and 13-week moving average could be in the near future.
If CRM’s chart doesn’t scare you as overbought, maybe the news of 6.5 million shares sold by insiders two weeks ago will.
The risk/reward in CRM isn’t favorable to traders at this time. Traders anticipating a takeover announcement for CRM could be right, but they’re taking a very large gamble, indeed.
Want more? Check out the CRM message board buzz.
See what newsletters are recommending this stock here.
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