Markets are cyclical, and often so are companies. A great product or service won’t last forever. Once the market has been saturated, new products or features are needed to keep revenues growing at a company.
For tech companies, this constant iteration is fantastic. It’s inexpensive to develop new ideas and roll them out. And for many tech services, new features can be added while keeping customers on a monthly payment plan.
So it’s no surprise that a number of activist investors are targeting Salesforce (CRM). The software-as-a-service giant has been a poor performer, but it’s attracting billionaire investors who see plenty of ways to unlock value.
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Even with shares bouncing solidly off their lows, the stock is down 22 percent in the past year. Earnings slid 55 percent, even on a 14 percent increase in revenues.
Action to take: Shares are one of the more interesting buys in the tech space at current prices. If a successful turnaround plan takes place, the company can vastly increase its profitability – currently a scant 1 percent, while bringing earnings higher.
For traders, the May $195 calls, last going for about $6.75, offer mid-to-high double-digit returns on a move higher in shares from a turnaround plan in the coming months.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.