Stifel Says 3 Red-Hot Software Stocks Are Serious Takeover Candidates

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RingCentral

This is another smaller company that could be a great takeover target. RingCentral Inc. (NYSE: RNG) offers a cloud-based solution for business communications that replaces legacy and expensive on-premise communications systems. It is delivered as an application that follows the user regardless of device (office phone, smartphone, desktop, tablet). Features include voice, text, fax, audio conferencing and integration with document and customer relationship management systems.

The SunTrust view is very positive:

Our price target equates to ~6x our 2019 estimated revenue estimates. This is in line with the 20%-30% growth peer group currently trading at 5.7x. Furthermore, we believe this valuation takes into account attractive upside potential to our estimates coming from multiple catalysts including continued traction with mid/enterprise customers, increased partner traction, international expansion and continued dislocation in the industry from legacy PBX/UC vendors.

The $60 SunTrust price target should be going higher. The $64 consensus target is the same as the most recent closing price.

Salesforce.com

This top company reported solid fiscal 2018 second quarter results as billings drastically improved. Salesforce.com, Inc. (NYSE: CRM) offers enterprise cloud computing applications and platform services, including Sales Cloud that enables companies to store data, monitor leads and progress, forecast opportunities, gain insights through relationship intelligence and collaborate around sales on desktop and mobile devices.

The company also provides Service Cloud, which enables companies to deliver personalized customer service and support, as well as connect their service agents with customers on various devices; and Marketing Cloud, which enables companies to plan, personalize and optimize customer interactions.

Marking the biggest acquisition in its history, Salesforce recently agreed to pay $6.5 billion in a cash and stock deal for business software company MuleSoft. MuleSoft went public in March of 2017 and spent the year increasing sales while trying to manage its growing losses. In the company’s fourth quarter, it brought in $88.7 million in sales, which was a 60% bump from the previous year during the same period.

SunTrust has set its price target at $133. The consensus price objective is $137.35, and shares closed at $117.19.

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Three potential takeover candidates and a big player in the customer relationship management field that all make great additions to aggressive accounts. While there is absolutely no guarantee that any of the three potential targets do get bought, they make solid holdings as standalone companies.