Salesforce (NYSE:CRM) is a stock that deserves attention from investors seeking promising opportunities.
In 2023, technology stocks made a remarkable recovery following a substantial decline in 2022, which was prompted by concerns about a recession, inflationary pressures, increased oil prices, and rising interest rates. The Nasdaq Composite, a tech-heavy index, has surged by 28.8% year-to-date (YTD), outperforming the Dow Jones Industrial Average’s 1.4% increase and the S&P 500’s 12.9% uptick.
Technology stocks account for over 50% of the Nasdaq Composite index’s weight, with the Technology Select Sector SPDR, a critical component of the broader market index, delivering a YTD return of 36%.
Salesforce is one stock that has outpaced the broader Zacks Computer – Software industry, with an impressive YTD gain of 56.3%.
Why Invest in Salesforce Stock?
Salesforce’s current trading price, on October 9, 2023, stands notably below its 52-week high, indicating potential for upward movement. It closed at $207.22, which is 13% lower than the 52-week high of $238.22 reached on July 19, 2023.
Furthermore, Salesforce currently boasts an appealing valuation. The stock trades at a forward price-to-earnings (P/E) multiple of 23.12X for the next year, contrasting with its five-year average of 115.13X. It also trades at a discount to the Zacks Internet Software industry’s forward P/E multiple of 29.46X.
In an environment characterized by ongoing macroeconomic challenges and geopolitical uncertainties, prudent investors seek out financially robust growth companies. These companies, with solid fundamentals, offer a hedge against economic downturns.
CRM has a strong track record of earnings surprises, surpassing estimates in all four of the past quarters with an average earnings surprise of 14.2%. Additionally, it boasts impressive earnings per share growth projections for fiscal 2024 and fiscal 2025.
For fiscal 2024, the Zacks Consensus Estimate stands at $8.06 per share, reflecting a substantial growth rate of approximately 53.8% from the previous year. In fiscal 2025, the consensus estimate for earnings sits at $9.37 per share, indicating a year-over-year increase of 16.3%.
Long-Term Growth Catalysts
The rapid adoption of cloud-based solutions is driving demand for Salesforce’s products. The company’s strategic focus on tailoring products to meet customer needs is fueling its revenue growth.
Management believes that digitization is strengthening the company’s strategic partnerships, with its integrated solutions addressing customers’ business challenges being a key driver.
According to a Fortune Business Insights report, the global CRM software market, valued at $64.41 billion in 2022, is projected to achieve a compound annual growth rate (CAGR) of 12% from 2023 to 2030. Salesforce, with its SaaS-based CRM and social enterprise applications, is well-positioned to lead this market.
Salesforce is also heavily investing in generative artificial intelligence (AI) tools across its product offerings to maintain its competitive edge. The launch of Einstein GPT in March 2023 marked its entry into the generative AI space. In June 2023, CRM introduced its AI Cloud service, a comprehensive AI-powered solution for enterprises looking to boost productivity, and increased its venture capital fund for generative AI from $250 million to $500 million.
Additionally, Salesforce’s partnerships with industry giants, including Alphabet, Apple, and Amazon, have solidified its position in the global business landscape. Collaborations such as the one with Google to create connections between Salesforce and Google Workspace, announced on September 12, and the deepening partnership with Apple on mobile apps for iPad and iPhone, revealed on August 20, have expanded Salesforce’s reach. Furthermore, the partnership with Amazon Web Services has been reinforced in the Generative AI sector.
In addition to strategic partnerships, acquisitions have played a pivotal role in strengthening Salesforce’s business. The acquisition of Airkit.ai, an AI-powered customer service app development startup, has further enhanced Salesforce’s presence in the AI and CRM software arena.
Salesforce’s most recent financial results for the second quarter of fiscal 2023 demonstrate sustained growth despite disruptions caused by macroeconomic challenges and geopolitical uncertainties. The company reported second-quarter 2023 revenues of $8.6 billion, representing an 11% year-over-year increase.
Featured Image: Megapixl
Author Faith Yakubu 
