Opinions
Stockchase Insights
SalesForce.com Inc.
CRM-N
HOLD
Sep 16, 2024
Stock price when the opinion was issued
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On the fence on this name. Back in the day it was a high-growth software company, but now lower growth (which happens as you get bigger). Recent deal is fine. But activists had identified ways to eke out more profit, company said no more M&A, and now it's back to M&A.
Also, he's waiting for more durability in the software AI story, which is slowly coming together. Wait and see, better ideas elsewhere right now.
Beat, raised, doing a (really accretive) acquisition at a reasonable multiple. Earnings were flat YOY, but revenues were up 7.6%. Reducing headcount by 10%. Guiding to 8-9% revenue growth.
Dominant player. A stock you have to own, but has to be at the right price. (He's cheap, he wants to get it at a better price ;) Trades at 20x PE for 2027, with 13%. Better places to put capital to work. Try for 5-10% lower.
Revenue growth is expected to be about 9% annually till FY2027 and EPS is expected to expand 22% for FY2025, 10% for FY 2026, and 14% for FY 2027. We think CRM is a strong name, but growth has slowed down as capital spending on external SaaS solutions has tightened up. The company should benefit as AI is adopted, but it appears that many large companies are shifting spending to developing in-house AI solutions. As rates come down and companies ideally have more to spend on SaaS solutions, CRM could see growth improve. We generally view CRM positively and think it's valuation at 25x forward earnings is fair, although there are higher growth opportunities at similar multiples. We would be fine switching from CRM into another mega-cap tech name.
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