Friday, November 23, 2007

Paperstand (WFMI, CRM)

The WSJ’s “Heard on the Street” column discusses Whole Foods (WFMI), saying that the co’s investment story is a lot like the goods on its shelves: Pricey, but so compelling that ppl keep going back. Committed Whole Foods investors are heartened by its resilient sales, the growth prospects of its recently acquired Wild Oats stores and its dividend, which the co boosted by 11% in the latest qrtr. Yet more competition, higher costs and murkiness surrounding Wild Oats' dilution on ‘08 earnings suggest that investors, unless they have strong stomachs, should consider shopping elsewhere. "It's a stock that today you just have to step aside on," says Rob Lutts, of Cabot Money Mgmt.

Barron’s Online highlighs (CRM), saying that the co may well boost its cash earnings by 45% next year, but even with that healthy growth, its shares are pricey at a recent $56. As more and more Wall St analysts have begun focusing on results based on cash earnings, rather than on reported earnings, it's becoming more difficult to tell which co’s are really doing well. But no one can quite agree on what multiple of cash flow that a stock should fetch to be fairly valued. This creates a great deal of uncertainty about whether Salesforce is a bargain or a dog at its current price, which is about 40x next yr's expected free cash flow. There's no doubt what the bulls think. The stock has jumped 42% in the past 3mo’s. But there's no reason to believe that this run can last when other promising tech co’s are seeing their shares fall in an environment of heightened volatility and worries about the economy.

1 comment:

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