If only it were that simple. All of these "dot.com" tech stocks are either at the top of their analyst target range or well above it. Doesn't matter they keep going up. See below:
NFLX - avg target = $106.9. Current pps = $129.96
FFIV - avg target = $83.25. Current pps = $91.04
PCLN - avg target = $294.13. Current pps = $302.36
VMW - avg target = $75.76. Current pps = $81.79
CTXS - avg target = $53.79. Current pps = $59.21
BIDU is the only one that is actually below its avg target of $85.44
Keep in mind these are 12 month targets. Let the MOMO continue!
On what basis do you think CRM is going to $150? VMWare is in cloud computing just like CRM and is another high flier. But it trades at 137 trailing PE and 89 forward PE as compared with CRM's 199 trailing PE and 217 forward PE. Even at VMW's lofty valuation, CRM would have a value of $71 per share.
Another case in point about Goldman's scheme can be found in the stock of SWM (Schweitzer Mauduit), a cigarette paper company. Goldman touted this stock to outrageous valuation compared to its peers, trading at 80x rather than 20x, and drove the stock price up from $50 to to $83 in 4 months from September 2009 to January 2010. Then, like all high fliers that we know from history, the roof caved in. One month after peaking at $83 on 1/14/10, the price dropped precipitously by 40% to $50 in just one month, including a 28% drop in just a single day on 2/11/10. As you might have guessed, Goldman began to dump shares after it drove the price up to ridiculous levels.
Further, given CRM's current market cap of $14.5 billion, no board of any potential large acquirers would approve acquiring a company with such valuation.
Given the above and that cloud computing is attracting major competitors (remember how RIMM used to dominate the smart phone market and look at it now), the odds are that CRM's lofty price cannot be sustained and that it will inevitably fall just as fast it has risen.
Agree that it will eventually come down, but not on Monday or even next week. It closed HOD on Friday and this means the MOMO will continue on Monday, maybe longer. Plus the analyst pumps just started on Friday with UBS and Kaufman. We will likely see more upgrades (pumps) with outlandish price targets next week.
As I have said in earlier posts, this is one of the blind MOMO plays like CTXS, PCLN, NFLX, VMW, BIDU, FFIV, etc.
Just look at the weekly charts for CRM, VMW, BIDU and FFIV. They all look the same - straight up, even when the market corrects.
Valuations don't matter. Just MOMO.
Stock is at an all time high!! Just buy more.
Stock is way over valued. Doesn't matter. Just buy more.
The technicals indicate a correction is order. So what? Buy more.
And the Wall St analysts are right behind this with upgrades and increased price targets.
Its 1999 all over again!