JMP Highlights Several Reasons NetSuite's Takeout Price Could Increase

After placing NetSuite Inc (NYSE: N) shares under review on July 28, speculation of an offer price boost from Oracle Corporation (NYSE: ORCL) led JMP to take another, closer look at the stock.

Analysts Patrick Walravens and Mathew Spencer of JMP maintain their Market Outperform rating on the stock while bumping the target price on the shares to $121 from $100 compared to the current $109 offer from Oracle.

Reasons For Boost In Offer

The analysts believe the price for NetSuite will likely increase for a few reasons:

• The offer is being subject to the approval of a majority of the "disinterested shares," of which there are 49 percent of the shares outstanding.
• One institutional shareholder already publicly stated that "at the current offer price, it would prefer to see NetSuite remain independent."
• It is in the firm's opinion that the NetSuite sales process did not "effectively canvas the market" as is required under Delaware law when there is only a single offer.
• The analysts believe NetSuite is a "unique and highly-strategic asset" that merits a "premium" takeout valuation multiple.

Related Link: 3 Reasons Workday's Business May Be Re-Accelerating

Valuation

The analysts noted that NetSuite currently trades at a 2017 EV/revenue multiple of 7.7x, and the firm's new $121 price target implies a multiple of 8.6x, which is the average of multiples paid for recent market purchases of SuccessFactors and Concur.

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