Salesforce (CRM): Fresh AI Integration and Federal Partnerships Put Valuation in Focus

If you’re holding Salesforce (CRM) or considering adding it to your portfolio, the past week may have caught your attention. The company recently rolled out a deep integration of Seismic’s AI into its Agentforce platform and secured a public sector partnership with Emergent, LLC, making Salesforce’s technology more accessible for federal agencies. These developments highlight Salesforce’s ambition to strengthen its position in AI-powered software and tap into new government contracts, both of which could set the stage for meaningful changes in its growth trajectory.

Over the past year, Salesforce shares have struggled, declining by about 6%. The stock has seen an even steeper drop of 25% year to date, despite headline innovations and expanding AI capabilities. Recent announcements, including the Regrello acquisition and new industry partnerships, have brought renewed attention, but momentum in the stock has been mixed as investors weigh long-term growth opportunities against current competitive pressures and slowing top-line expansion.

After a year of underperformance and recent progress in the AI and public sector arenas, questions remain about whether Salesforce is now undervalued with potential for gains, or if the market has already priced in these future catalysts. Let’s review the numbers.

Most Popular Narrative: 10.8% Overvalued

According to the narrative by Goran_Damchevski, Salesforce appears overvalued by 10.8% based on a user-driven assessment of its financial future. The analysis combines expectations for market expansion, revenue growth, and margin sustainability, set against what is seen as increasingly ambitious market growth assumptions.

“The problem I see with Salesforce’s growth strategy is that when we go through the company’s pre-AI business commentary, we see that it relied on increasing the cloud offering to existing customers, further penetration in the enterprise level market, and growth via acquisitions. In other words, other than selling more of the same, it was hard to see a thought-out growth strategy coming from management before AI broke and saved their story. Now that it has though, I believe that it will take advantage of this opportunity and retain leadership.”

What underpins this overvaluation call? This narrative highlights bold revenue growth, aggressive market share targets, and high profit margins. The critical factor is the assumption that AI will significantly influence Salesforce’s strategy. Interested in the financial forecasts underpinning these projections? The full narrative reveals the key numbers at play.

Result: Fair Value of $223.99 (OVERVALUED)

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

However, if Salesforce manages to attract more enterprise customers or successfully leverages AI for distinctive product offerings, the overvaluation thesis could quickly lose its footing.

Find out about the key risks to this Salesforce narrative.

Another View: DCF Model Points to Opportunity

Switching focus, the SWS DCF model tells a different story and suggests the stock is undervalued. This approach relies on long-term cash flow projections instead of growth assumptions or market multiples. Which outlook will prove right?

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

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Salesforce for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Salesforce Narrative

If you’re keen to dig deeper and have a different perspective, you can develop your own Salesforce view from the data in just minutes, or 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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