Salesforce (CRM): Examining Valuation as Investor Sentiment Shifts After Sluggish Share Performance

Salesforce (CRM) investors are taking another look after a stretch of underwhelming stock performance, with shares recently moving down once again. While there has been no single event or headline to spark the latest dip, this pattern can sometimes signal deeper shifts in how the market is sizing up the company’s growth and profit outlook. If you are on the fence, wondering if these moves are noise or signal, you are not alone.

Over the past year, Salesforce has seen its momentum slow, with the share price slipping by 5% and trailing broader tech benchmarks. The past month has not offered any relief, with the stock drifting lower and now down about 1% for that period. Despite some positive longer-term gains over three years, returns across more recent periods point to fading investor enthusiasm. Meanwhile, annual revenue and profit growth remain positive, suggesting the business is not standing still, even if the share price is not.

Given these mixed signals, some investors may be asking if Salesforce is due for a re-rating as the market catches up to its fundamentals or if future growth is already fully reflected in today’s price.

Most Popular Narrative: 6.8% Overvalued

According to the most widely followed narrative, Salesforce is currently trading at a premium to its fair value based on forward-looking growth projections and revised profitability expectations.

The company improved profitability margins, with the operating margin rising by 2.8% to reach 20%, and the net margin of 16.1%, up by 24% versus 13% year over year. The company is incrementally increasing its profitability, and I am upgrading my estimates from 17.5% in 2028 to 20% in 2029.

Wondering what is really powering this bullish narrative and future price target? There is one game-changing assumption behind the valuation that could completely reshape expectations for Salesforce. Which key metric signals a new growth era, and does it justify the current premium? Uncover the surprising forecast that turns conventional wisdom upside down.

Result: Fair Value of $223.99 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, risks remain, such as Salesforce exceeding growth expectations with new enterprise wins or successfully leveraging AI to defend its pricing power.

Find out about the key risks to this Salesforce narrative.

Another View: Discounted Cash Flow Tells a Different Story

Our SWS DCF model presents a contrasting picture, suggesting Salesforce could be trading at a discount to its intrinsic value. This raises the question: is the market underappreciating Salesforce's longer-term cash flow potential?

Look into how the SWS DCF model arrives at its fair value.

Stay updated when valuation signals shift by adding Salesforce to your watchlist or portfolio. Alternatively, explore our screener to discover other companies that fit your criteria.

Build Your Own Salesforce Narrative

If you think the prevailing story misses key details, or you would rather dig into the numbers personally, you can craft your own perspective in minutes. Do it your way.

A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding Salesforce.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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