Building a high-quality customer list has helped Salesforce grow revenue by 46% annually during the past five years, from $497 million in 2007 to $1.65 billion last year. For 2012, analysts, with ambitious guidance from company management, project revenue to come in at nearly $3 billion . Most interesting, however, is that with the stock trading near a lofty $142 a share, Salesforce.com has a market cap of more than $19 billion.

We’ve seen this movie before and the ending ain’t good…

I can think of more than a dozen reasons why you shouldn’t buy Salesforce.com at these levels. However, I’ll share the three most obvious…

1. Excessive optimism.
Former Fed Chairman Alan Greenspan called it “irrational exuberance.” Grandmothers call it “counting your chickens before they hatch.”

The language in research reports covering Salesforce.com is incredibly bullish. A recent report published by Credit Suisse referred to the company as “…an unstoppable force.” Company management has provided revenue guidance in a range of $2.92 billion to $2.95 billion, outstripping analyst consensus estimates of around $2.78 billion — eerily reminiscent of late 1990s, tech-company braggadocio. Whatever happened to “under promise and over deliver?”

2. Valuation rationalization
Salesforce.com’s metrics are clearly stretched out and, more often than not, obsessive fans of a certain stock will justify its price and argue why it can and will climb higher.

The most concerning piece of analysis I’ve noticed in analyst reports covering the stock is emphasis on bookings or contracts that the company has signed, but for which it has yet to actually be paid. Granted, 2012 bookings are projected to come in at $1.09 billion, a 57% increase compared with last year’s bookings of $696 million. That’s a significant increase, but these numbers haven’t even flowed to the top line yet, much less the all important bottom line.

There is value in the pipeline to be sure; however, the company lost $0.09 a share last year. That’s a non-existent trailing price-to-earnings (P/E) ratio. The forward P/E is around 70.

Shares trade at a 210% premium to their sector peer group. The first downward guidance from either the company or analysts, and the market will, as always, show that, among other things, it’s a voting machine.

3. No moat
The old Warren Buffett tenet of investing in a business with a deep moat (i.e. high barriers of entry) applies here.

Yes, Salesforce.com has a lot of buzz and a decent brand name in the CRM software business. But it’s a software business. Theoretically, a college dropout who can write code could build a better mousetrap in their garage.

There are more realistically priced (and underpriced) and proven alternatives in this sector.

Oracle Corp. (Nasdaq: ORCL): One of the greatest legacy enterprise software firms in the business. Shares trade near $30, with a forward P/E of less than 12 times earnings. That’s not bad, considering the forward P/E for the S&P 500 is around 13.

SAP Ag (NYSE: SAP): A global leader in the enterprise space for decades, SAP shares trade at about $68, have a forward P/E of 19, which, while a little more than the S&P’s average multiple, is still much cheaper than Salesforce’s earnings multiple (assuming it even earns money at all this year).

Automatic Data Processing (NYSE: ADP): This company is truly a legend in the information processing world. From payroll to financial services platforms, ADP is a go-to name for small firms and global powerhouses alike. At about $54 a share, a forward P/E of 18 and a historically-rising dividend with shares currently yielding a little less than 3%, ADP is a stalwart name that fits well in any portfolio.

Risks to consider: Salesforce.com shares are clearly overextended and are where the most obvious risk lies. However, investing in a more sensible alternative exposes a portfolio to the risks inherent to the enterprise software business. While the U.S. economy continues to show marked improvement, it’s still tenuous. The best way to play defense against these variables is to stick with higher quality names.

Action to Take –> If you own shares of Salesforce.com and have a gain, then congratulations. The market has given you a gift. Take it and say “thank you.” If you’re considering buying into the hype, then don’t. There are better ways to get exposed to enterprise software (the broader sector Salesforce.com is in), and the stocks I mention above are a good place to start your research.

– Adam Fischbaum

The moon will officially become full at 11:35 p.m. on Saturday, May 5. This coincides almost perfectly with the moon’s perigee — that is, the moment when the moon is closest to Earth in its orbit. This supermoon will be especially pronounced given that this will be the moon’s closest approach of the year.

There’s no need to get the kids out of bed for this one — the best time to view the moon will be the early evening, just after the moon rises. Catching a partially obstructed view of the moon is said to be best, as that will create an optical illusion that makes the moon seem even bigger.

The supermoon will have an effect on tides, though experts say there’s no need for alarm since the increased effect is still relatively weak. That’s not to say a supermoon hasn’t caused damage in the past: It’s believed that a supermoon event may have contributed to the sinking of the Titanic 100 years ago.

The perfect example of this process starting to sputter and fail is AMZN’s latest quarterly report. In that, AMZN used non-cash gimmicks to generate almost 70% of its reported net income (equity method of income from investments). It also sustained a $3 billion drawdown in its cash balances in order to pay off its bulging accounts payable account. It’s sales margins were almost negligible because AMZN subsidized the cost of everthing it ships (fulfillment) in order to generate sales.

At any rate, here’s a look at AMZN’s value as equity “collateral:” It has a market cap of $104 billion; a p/e ratio of 191 – note: the true p/e ratio calculated by stripping away accounting games is likely at 4-5 times higher; book value is $7.2 billion BUT nearly 50% of this is comprised of the intangibles of deferred tax assets and goodwill; strip away intangibles and tangible book value is $3.8 billion, leaving a market cap to book value ratio of 27x. One note of caveat, the tangible book value assumes a prima facie acceptance of AMZN’s fixed assets, listed at $4.6 billion. No doubt the market value of AMZN’s fixed assets is likely lower.

So there you have it. A good example of equity “collateral” according to Greenspan is a stock that trades at a near infinite multiple of true earnings and an absurd multiple of book value (most banks trade at a book value multiple of 1 or less). Please indicate to me if you would lend your money against AMZN (if so, I may want to borrow some money from you lol).

Don’t get me wrong, I love AMZN’s service. If I don’t need something immediately, I can shop on AMZN and get a better price on almost anything than at any competing store in Denver. Not only that, the price includes shipping in most cases. It’s great for the consumer. But AMZN is one of the “poster child” stocks that represents the extreme liquidity and fraud bubble that now permeates every aspect of Wall Street and DC. Eventually AMZN will collapse.

Amazon (AMZN) gave its typically conservative forecast for the current quarter that was below analysts’ forecasts. The stock was up more than 10% in after-hours trades, after closing the regular session up 0.8% to $195.99.

For the quarter ended March 31, Amazon reported net income of $130 million, or 28 cents a share, compared to net income of $201 million, or 44 cents a share, for the same period last year.

Operating income fell 40% to $192 million – implying an operating margin of 1.5% for the period.

Revenue rose 34% to $13.18 billion.

Analysts were looking for earnings of 6 cents a share on revenue of $12.9 billion, according to consensus estimates from FactSet Research.

Spending has continued to grow at Amazon, as the company works to keep up with its sales growth. Operating expenses grew 36% to $13 billion for the quarter — slightly outpacing revenue growth. Amazon said it added 9,400 employees during the quarter to bring its headcount to 65,600.

For the second quarter, the company projected revenue to come in between $11.9 billion and $13.3 billion. Analysts had been expecting $12.8 billion in revenue for the quarter.

Amazon also predicted its operating income line to come in a range a loss of $260 million and earnings of $40 million. Analysts had been expecting operating income around $97 million for the quarter.
-Dan Gallagher; 415-439-6400; AskNewswires@dowjones.com

So long as we got growth, we don’t need no stinking profit. That pretty much describes the twilight zone in which Amazon shares trade.

Investors were thrilled when the online retailer beat revenue projections for the quarter ending in March. Sales of $13.2 billion were up 34% year-on-year. That drove the stock up 15% on Friday.

Yet Amazon’s profits continue to underwhelm, with an operating margin of just 1.5%, or $192 million.

To put that in context, that is about the same amount of operating profit Apple earned per day last quarter. Yet Amazon’s valuation, net of cash on the balance sheet, is more than a fifth of Apple’s.

And even as revenue grows smartly, operating cash flow growth has stalled, rising just 1% to $3.1 billion over the 12 months ending in March. Part of the problem is that one source of cash is petering out. In the past, Amazon has used its clout to delay payments to vendors. That boosts cash in each quarter so long as “accounts-payable days” increase. But that figure fell to 62 last quarter, compared with 66 one year previously.

Ultimately, the bull case for Amazon shares seems to be that because its margins are so slim today, a small tweak in the business model could drastically increase profits at some point in the future. While Wells Fargo analyst Matt Nemer expects Amazon’s operating profit margin to be 0.7% this year, he notes that it peaked at 4.6% in 2009. But it is not clear how or when Amazon will return to peak margins.

Lately Amazon is investing more to build its business, likely racking up $2 billion in capital expenditures this year to build distribution and data centers. That means free cash flow is likely to shrink for the third year in a row. At its current share price, the company is valued at 56 times Mr. Nemer’s estimate of 2012 free cash flow.

Granted, such investments create a significant barrier to new entrants, helping Amazon maintain its lead in e-commerce. Its massive logistics operation means, for instance, supports faster shipping and better customer service than at Amazon’s rivals. Meanwhile, Amazon’s web-services unit is powering a new generation of Internet entrepreneurship by cutting costs for website developers. The latter is boosting the company’s “other” revenue line, although profitability isn’t disclosed, so the actual value for shareholders is less clear.

Meanwhile, Amazon’s low-cost model will likely suffer as it starts charging sales taxes in the U.S., including in California and Texas later this year.

Amazon’s calling-card will continue to be low prices. But while its products may offer the masses a discount, its shares certainly don’t.

(Rolfe Winkler is a Heard on the Street reporter covering technology. He joined The Wall Street Journal from ThomsonReuters, where he wrote commentary on finance and economics. Previously, he was an analyst at Matador Capital Management, a long-short U.S. equity hedge fund. He can be reached at 212-416- 3025 or by email at rolfe.winkler@wsj.com.)