No Salesforce takeover, Buy Cisco: Smart Money

Published Mon, May 11 20157:17 AM EDTUpdated Mon, May 11 20157:36 AM EDT

Here's the best Wall Street research that came across the desk of CNBC Pro on Monday. This may come as a surprise to many Salesforce.com shareholders, and even CEO Marc Benioff, but Morgan Stanley does not see a takeover in the cards for the red hot stock. "While we remain firmly convinced of the long-term fundamental story at Salesforce.com, the recent appreciation in the shares (up 11.4 percent since 4/28) has been driven largely by news reports (Bloomberg and Reuters) of a potential acquisition. Given our view that an acquisition of Salesforce.com represents a relatively low probability event, the lift in the stock price balances our near-term risk/reward perspective. A strongly positive view on the strategic positioning of Salesforce.com is one of the key reasons we find a transaction to be low probability." Morgan Stanley keeps its "overweight" and does see the stock appreciating 11 percent over the next 12 months, but it seems with this call to remove the shares from its "best ideas" list, the firm is hinting to clients the recent takeover exuberance needs to cool. Pacific Crest securities upgraded Cisco Systems to "overweight," citing "improving fundamentals and cloud prospects." "The April quarter could mark the beginning of a multi-quarter recovery driven by new product cycles across switching, routing, wireless and servers. We are raising estimates slightly on positive re-seller feedback and upgrading CSCO to Overweight on the assumption that improving fundamentals and cloud momentum can justify earnings and multiple expansion in 2H15 and into 2016. Our price target of $36 applies a forward P/E multiple of 14.8x, which is a discount to the S & P500 FTM P/E of 17.6x." The firm does see the stock appreciating 25 percent to $36 over the next 12 months, but that won't be due to CEO John Chambers' announcement last week that he was moving to executive chairman. "The board's appointment of 17-year veteran Chuck Robbins as the new chief executive officer to replace longtime Chairman and CEO John Chambers should be viewed by investors as likely not to create a material shift in operational or strategic direction. We expect changes, if any, will likely be minor and mostly tied to subtle changes in how Cisco interfaces with Wall Street rather than how it interfaces with Main Street." Baird upgraded two battered industrial giants, Caterpillar and Joy Global , on the belief that the drop in commodity prices finally stabilized. "Commodity deflation has evolved from a niche issue impacting specific sectors to a broad theme now solidly cemented in consensus thinking; in the process hopes for a quick rebound in Mining (the first victim of deflation) have been dashed and relative stock underperformance has been significant. Mining and commodity cycles last a long time, and the news is still bad – we acknowledge that. But, there are signs that the worst might be over and history shows that being early pays off." Caterpillar should rally 16 percent over the next 12 months and Joy Global should enjoy a whopping 48 percent surge, according to Baird. --With reporting by CNBC's Michael Bloom .

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Here's the best Wall Street research that came across the desk of CNBC Pro on Monday.