Investing in innovative companies can yield substantial returns, and Salesforce (NYSE:CRM) stock exemplifies this potential. As the world’s leading provider of customer relationship management (CRM) solutions, Salesforce has established itself as a dominant force in the enterprise software and cloud computing sectors.
However, despite this impressive growth, the stock has experienced significant fluctuations this year, with a marginal year-to-date (YTD) decline. In contrast, the Dow Jones Industrial Average (DJIA) has enjoyed nearly an 8% return during the same period.
Thus, CRM presents as an attractive buying opportunity for long-term investors who can weather short-term market fluctuations. Given Salesforce’s strong fundamentals and ongoing integration of artificial intelligence (AI), now may be an opportune time to consider adding CRM stock to your investment portfolio.
Salesforce Continues To Benefit From Long-Term Trends
Salesforce has demonstrated steady growth since its IPO in 2004, consistently increasing sales and product offerings. Favorable long-term trends in technology and strategic initiatives by Salesforce management helped CRM stock become a member of the DJIA in 2020.
Notable acquisitions, such as Demandware in 2016 and Vlocity in 2020, have enhanced Salesforce’s offerings and strengthened its industry-specific solutions. Additionally, it acquired Slack in 2021 to facilitate remote collaboration. CRM significantly increased monthly active users from 14.6 million in 2019 to 54.1 million in 2023. Recently, the acquisition of Spiff has further bolstered Salesforce’s capabilities. This move adds an incentive compensation management functionality.
Also, the AI investment surge increases demand for Salesforce’s integration and analytics features. The global CRM market, valued at $91.4 billion in 2023, could exceed $262 billion by 2032, with a compound annual growth rate (CAGR) of 12.6%. The global AI within CRM market is expected to expand even more rapidly, from $4.1 billion in 2023 to $48.4 billion by 2033 at a CAGR of 28%.
Salesforce’s commitment to AI is evident in products like Einstein Copilot and intentional partnerships with industry leaders like IBM (NYSE:IBM). Therefore, Salesforce remains a leader in AI-driven CRM solutions. Definitely, it’s a strong buy stock for investors looking to benefit from long-term growth trends.
CRM Stock: Recent Performance and Valuation
Despite the long-term fundamental growth trajectory of the company, Salesforce’s most recent earnings report raised eyebrows. While revenue reached $9.13 billion, an 11% increase year-over-year (YOY), it slightly missed consensus expectations. Adjusted EPS was $2.44 compared to $1.69 in the prior year. Operating cash flow saw a significant boost, with free cash flow rising 43% YOY to over $6 billion. And, management maintained full-year fiscal 2025 revenue guidance, projecting an increase of 8% to 9%.
Following the first quarter fiscal 2025 earnings release, investors hit the sell button in CRM stock indiscriminately. Despite this positive revenue growth, lower-than-expected growth rates led to the stock’s 20% decline. Nonetheless, since then, CRM stock has presented an attractive buying opportunity for investors. In fact, Salesforce shares have been recovering over the past several weeks. Hence, investor returns may be on the horizon.
Meanwhile, Wall Street analysts share this optimism, with an overall outperform rating among 51 analysts. The 12-month median price target of $300.19 is over 14% higher than current levels.
However, Salesforce’s price-to-earnings (P/E), price-to-book (P/B), and price-to-sales (P/S) ratios are 46.5x, 4.3x, and 7.1x, respectively. These figures are notably higher compared to the sector average, which stands at 12x, 2.4x, and 2.1x. This premium valuation suggests that some future growth potential may already be priced into the stock. In other words, investors will want Salesforce management to deliver robust results in the coming weeks.
The Bottom Line: Salesforce is a Long-Term Buy
Salesforce has evolved from one product to a diversified portfolio, growing into a $254.6 billion company and still holding significant potential. Its forward-looking approach to AI, strategic acquisitions and continuous innovation solidify its leadership in the CRM space. The stock’s recent decline offers a compelling entry point for long-term CRM investors.
With a solid financial record and a promising outlook, now is potentially a good time to add Salesforce to investment portfolios. Despite near-term market fluctuations, Salesforce’s robust fundamentals, leadership in AI and strong market position make it a prudent investment choice for those looking to benefit from long-term growth trends.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.