SalesForce.com Inc. (CRM)

12-month price target of $400, good runway still. Has really monetized the application side of AI, the golden goose that everyone was aiming for. Should report in next couple of weeks.

They report end of the month; he expects a strong quarter based on AI. Acquisitions they made are becoming accretive.

Is excited with their software pivot. Have $12 billion in free cash flow, fueling $9 billion in buybacks. Dividend is small, but will rise.

A strong believer in the CEO, and Morgan Stanley praised how CRM has benefitted its clients. Hold or buy dips.

One of the leaders in the technology space, bringing automation into offices. Well managed. Has done extremely well, and this should continue. Fits well into the grand theme of electronics replacing humans.

They're pushing AI and introducing a lot of services to customers. Good. He uses CRM software. They are increasing rates to customers by 9%. True, a lot of services are not necessary, so he's cancelled them for next year. Other companies will nip at CRM's heels as they roll out more AI. CRM is highly acquisitive. The high USD is hard on non-American customers.

On Dec. 3, they missed top and bottom lines, but shares actually rallied because the CEO talked about Agent Force which impressed the street. Has a decent runway. Best to buy around $320; it won't fall below $300.

He sold CRM because revenues were declining the last 8 quarters. 

Will be one of the beneficiaries among the outer circle of applications of the AI stack. 12-month price target of $365.

They did a small tuck-in acquisition. The stock is trending higher, now at its 200-day moving average, a good sign. If it breaks that, it sells at 20x PE, a discount to the market. Revenues will pick up.

Yesterday, CRM launched their AI tool, AgentForce. Shares sank today when the Fed cut 50 bps, but CRM shares will shine on other days because of this AI tool. AF could be a game-changer. The CEO has introduced many products, but seems most excited about this and many companies have already signed up for it.

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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Money has been flowing into AI, not software where none of these stocks is cheap and in heavy competition. A tough space.

We tend to be faily cautious of a company after an earnings guidance warnings and  a large stock decline. The market is quite efficient in marking down large-cap names with weaker growth prospects, but also the guidance can give holders a 'reason' to sell over the next few months, especially if we see any general market weakness.  This could result in a re-rate for the company as growth slows down. That being said, CRM is a well-established company with a diversified portfolio of products, and the company has been and will still be around for quite some time. CRM also just transitioned into a more shareholder-friendly company by announcing dividends, and doing more buybacks. Overall, we would see it as a HOLD, with potentially a slow accumulate BUY into further weakness over the balance of 2024. Some patience is going to be required here but ultimately we think it recovers. 
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