Blue-Chip Software Stock Falls After Buyout Attracts Bear Notes

At least three analysts have chimed in with price-target cuts

Assistant Editor
Dec 2, 2020 at 10:46 AM
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The shares of Salesforce.com, Inc (NYSE:CRM) are plunging, down 7.5% at $223.22 at last check, after the company confirmed it acquired Slack Technologies (WORK) for $27.7 billion in cash and stock. The deal gives the blue-chip software concern ownership of Slack's messaging and workflow platform. In response, the security received no less than three price-target cuts, including one from Barclays to $276 from $315. However, Raymond James also chimed in on CRM with a price-target hike to $280 from $255.

Coming into today, analysts were overwhelmingly optimistic toward Salesforce stock, with 22 calling it a "strong buy," and four saying "hold" or worse. Plus, the consensus 12-month price target sat at $278.03, which is a whopping 25.7% premium to last night's close, and leaves CRM exposed for even more price-target cuts moving forward.

Salesforce stock pulled back slightly after its Sept. 2 record high, but the $230 level stepped up as support in recent months. And while today's gap lower has CRM breaching this floor, their 100-day moving average has so far contained the drop. Longer term, Salesforce stock sports a 37.2% year-over-year lead.

There is plenty of pessimism in the options pits, too. This is per Salesforce stock's 50-day put/call ratio at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which stands higher than 92% of readings in its annual range. In simpler terms, puts are being picked up at a quicker-than-usual clip.

Drilling down to today's options activity, 177,000 calls have exchanged hands in just the first half hour of trading, which is 12 times the average intraday amount. The weekly 12/4 220-strike call is by far the most popular, with new positions being opened.

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