Salesforce (CRM) Fundamental & Technical Analysis



Salesforce is a leading American cloud-based customer relationship management (CRM) software company founded in 1999 by Marc Benioff. It is known for providing a suite of business software solutions that help organizations manage their customer relationships, streamline their operations, and drive growth. Salesforce has become so intertwined with businesses that leaving the software is almost not an option, which gives the company a strong market position. Their revenue model is also predictable considering it generates a substantial portion of its revenue from subscription-based services, leading to stable and predictable income streams. 

Fundamental analysis:

Salesforce has grown steadily for several years now, more than tripling its revenue from 8.40B in 2016 to 31B in 2022. Like many other companies, Salesforce suffered from a slowdown in growth towards the end of 2022 and start of 2023, but the company recently announced a change in their pricing model, increasing their service costs to consumers. This change indeed helped as they reported strong forecasts in their most recent earnings. Looking at their balance sheet, Salesforce has a 2:1 asset to liabilities ratio with assets at 102.6B and liabilities at 44.22B; and the company’s free cash flow is 8.21B (TTM), which makes them healthy all around. 


It is important to look at the both the pros and cons when analyzing any investment, we’ve already talked about the pros for CRM, now let’s talk about the cons starting with valuation concerns. Salesforce's stock has historically traded at relatively high valuations, which can make it susceptible to market corrections and heightened price volatility. The company’s current price to earnings ratio is 135, which is much higher than the healthy 20-25 ratio in their industry. This anomaly can be attributed to Salesforce’s focus on revenue growth instead of profitability. The company’s leadership utilizes revenue to expand research & development and has also been used to buyout companies like Slack and Tableau. This brings down their overall net and makes them appear very expensive to investors. While this is a good thing, investors have recently put the pressure on CRM to cut costs and bring up profitability, which they appeared to do so in their most recent earnings.