Salesforce (CRM) provides a cloud-based customer relations management (CRM) platform. I am bullish on the stock.
What’s special about Salesforce is that the company pioneered CRM in the digital age.
Through cloud computing, a team can work together from anywhere while staying informed on clients’ buying trends and much more.
However, don’t expect to pick up CRM stock at a rock-bottom price anytime soon. As fellow TipRanks contributor Stavros Georgiadis put it, Salesforce stock carries a premium price tag.
Yet, Georgiadis also called Salesforce a great business. Indeed, there are reasons to believe that CRM stock, which not low-priced by any means, could still move higher. (See Analysts’ Top Stocks on TipRanks)
A Quick Look at CRM Stock
In 2021, CRM stock went pretty much nowhere until May, and then, boom.
The stock exploded over the next five months, rallying from $200 to $300 by the end of October.
Any Salesforce short sellers out there must be sweating right now. This stock has been relentless, almost as if no one wants to take profits on CRM.
Also worth noting is Salesforce’s trailing 12-month price-to-earnings (P/E) ratio, which is 120.8. That’s not a number which value-focused investors would probably want to see.
On the other hand, seemingly high P/E ratios can be justified if the company is on the right trajectory, financially speaking.
With that in mind, let’s check under the hood and see if Salesforce’s fiscal outlook can infuse the skeptical investors with some confidence.
Guiding High
Not long ago, Salesforce issued an update on the company’s revenue-related forward guidance.
Please understand that forward guidance doesn’t always reflect what actually happens.
That being said, it’s generally a positive sign when a company anticipates strong revenues.
In Salesforce’s case, the company raised its Fiscal Year 2022 revenue guidance to a range of $26.25 billion to $26.35 billion.
You might be hard-pressed to find a cloud-based CRM specialist with expected annual revenues of that magnitude.
In case that isn’t enough, Salesforce also initiated Fiscal Year 2023 revenue guidance with a range of $31.65 billion to $31.80 billion.
A Ballooning Ecosystem
If there are any bears or skeptics left at this point, there’s plenty more data to change your mind.
As it turns out, a new study from IDC supports the point that Salesforce is transforming and expanding the CRM market as we know it.
If you can believe it, the already sizable Salesforce partner ecosystem is on track to grow to nearly six times the size of Salesforce itself by the year 2026.
Also by that year, according to IDC, Salesforce and its ecosystem of partners will create 9.3 million new jobs and $1.6 trillion in new business revenues globally.
Moreover, by 2026, Salesforce’s partner network will make $6.19 for every $1 that Salesforce makes.
Thus, Salesforce is clearly driving immense growth for its partners, which in turn should make Salesforce the go-to choice for CRM and cloud-related technologies.
Wall Street’s Take
According to TipRanks’ analyst rating consensus, CRM is a Strong Buy, based on 31 Buy and six Hold ratings. The average Salesforce price target is $321.63, implying 6.9% upside potential.
The Takeaway
All in all, Salesforce presents a win-win scenario for its clients, partners, and stakeholders.
As the company models strong future revenues, CRM stock doesn’t seem so expensive anymore.
Given the powerful forward momentum of the company and the stock, betting against Salesforce would be like trying to stop a speeding train — a bad idea, for sure.
Disclosure: At the time of publication, David Moadel did not have a position in any of the securities mentioned in this article.
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