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Sushree Mohanty

With AI Continuing to Heat Up, Is Salesforce Stock a Good Buy Now?

The customer relationship management (CRM) market has undergone significant transformation, driven by technological advancements and the integration of artificial intelligence (AI). Early CRM systems were limited to basic functions like contact management, customer service, and sales force automation.

Evolving customer expectations, data-driven decision-making, and the emergence of cloud-based CRMs have made these solutions more accessible to businesses of all sizes.

Salesforce (CRM), with a market capitalization of $305.3 billion, is a dominant force in the CRM space. The company offers cloud-based software-as-a-service (SaaS) solutions. Its portfolio has grown over the years to include an array of tools for sales, marketing, customer service, and analytics.

In 2024, Salesforce’s stock rose by 30.5%, surpassing the broader market’s 24% gain.

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About Salesforce Stock 

Salesforce’s SaaS model generates recurring revenue from subscription-based services. The company has diversified its portfolio over time by making strategic acquisitions. These include Slack, Tableau, and MuleSoft, and have bolstered its position in enterprise communication, data analytics, and systems integration. These acquisitions also help with cross-selling opportunities and revenue growth.

The company’s ability to expand its customer base and upsell new products is reflected in its financials. In the third quarter of fiscal 2025, revenue increased 8% year-over-year to $9.44 billion, while diluted earnings under generally accepted accounting principles (GAAP) increased 26% to $1.58 per share during the quarter.

Subscription and support revenues rose by 9% in the quarter. Its current remaining performance obligation (or RPO), which is the amount of revenue yet to be recognized, totaled $26.4 billion.

Salesforce has incorporated AI into its platform through Einstein AI. This feature offers predictive analytics, intelligent recommendations, and automated workflows that allow businesses to make data-driven decisions. Management claimed during the Q3 earnings call that Salesforce is the “largest supplier of enterprise AI in the world” with “2 trillion Einstein transactions a week.”

Furthermore, its new Agentforce platform, an autonomous AI platform that will provide “specialized, always-on support to employees or customers,” will represent the next evolution for the company. 

Last week, the company introduced two AI-driven innovations for retailers: Agentforce for Retail and Retail Cloud with Modern POS. The company says it aims to enhance productivity and sales for retail sector employees and customers by providing more personalized shopping experiences.

Salesforce has even collaborated with Nvidia (NVDA) to combine its Agentforce platform and the NVIDIA AI Enterprise platform to enable supercharged insights and improve productivity. 

Financially, the company is in a good position to be able to fund its expansion projects. It ended the quarter with $12.7 billion in cash, cash equivalents, and marketable securities.

Salesforce generates substantial free cash flow (FCF), which it uses for acquisitions, share buybacks, and dividends. In Q3, FCF reached $1.78 billion. It returned $1.2 billion worth of share repurchases and $400 million in dividends.

Looking ahead, for full fiscal 2025, management expects 8% to 9% year-over-year growth in revenue, with earnings increasing to between $6.15 and $6.20 per share. 

What Does Wall Street Say About CRM Stock?

Last week, Needham analyst Scott Berg reaffirmed his “Buy” rating for CRM stock with a price target of $400. Berg sees huge potential in Agentforce and believes it will bring in substantial growth in the latter half of the year for the company. 

Morgan Stanley also maintained a “Buy” rating with a price target of $405. JPMorgan and DBS also held on to their “Buy” rating for this AI stock.

Overall, on Wall Street, Salesforce stock is a “Moderate Buy.” Out of the 45 analysts that cover the stock, 32 rate it a “Strong Buy,” while three recommend a “Moderate Buy,” eight rate it a “Hold,” and two suggest a “Strong Sell.”

Based on the average target price of $396, CRM stock has upside potential of 24.1% from current levels. Its high target price of $450 suggests the stock could rally 41% over the next 12 months. 

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The Key Takeaway

The global customer engagement solutions market could grow to be worth $32.2 billion by 2027. Salesforce has already cemented its position as a dominant player in the cloud-based CRM and enterprise software markets. Its strong fundamentals, recurring revenue model, and focus on innovation, along with the growth AI has brought, make it an attractive choice in the tech space now. 

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