We expect Salesforce.com (NYSE:CRM) to continue to increase its share in the Customer Relationship Software (CRM) market, such that it surpasses its competitors SAP (NYSE:SAP), Oracle (NASDAQ:ORCL) and Microsoft (NASDAQ:MSFT) and becomes the market leader by the end of Trefis forecast period.
Salesforce.com CRM market share has increased at a rapid pace from around 7% in 2006 to around 13% in 2009, and we expect it to continue to increase to reach to around 25% by the end of Trefis forecast period. Below we look at a potential 5% upside and downside scenarios for our CRM market share forecasts.
We estimate that CRM software accounts for around 63% of the $128 Trefis price estimate for Salesforce.com’s stock, which is about 5% below the current market price.
- How Has Salesforce.com’s Revenue and Gross Profit Composition Changed Over The Last Five Years?
- By How Much Has Salesforce.com’s Revenue & Gross Profit Changed In The Last 5 Years?
- By How Much Is Salesforce.com’s Revenue & Gross Profit Expected to Change In The Next 5 Years?
- How Is Salesforce.com’s Revenue and Gross Profit Composition Expected To Change In The Future?
- What Is Salesforce.com’s Fundamental Value Based On Expected 2016 Results?
- What is Salesforce.com’s Current Revenue and Gross Profit Breakdown?
+12% upside – CRM Market share rises to 30%
We believe that Salesforce.com will benefit from the fast growth of cloud computing CRM software market. The favorable factors for this tremendous growth are speed and ease of implementation and low total cost of ownership. The global on-demand CRM software market has grown from less than $500 million in 2005 to $2.3 billion in 2009, representing an average annual growth rate of 46%, compared to single-digit growth for the on-premise segment of the CRM software market.
There could be an upside of about 12% to our estimate for Salesforce.com stock if its market share increases at a faster rate to reach 30% by the end of Trefis forecast period.
Drag the trend line above to see the sensitivity on stock price from changes in market share
- 10% downside – CRM Market share rises to 20%
Although we expect cloud computing CRM to continue its rapid growth, security concerns remain due to the fact that the data on the cloud resides over the internet and companies may be reluctant to use it. This may discourage a few sectors like the financial sector to adopt cloud computing software due to data sensitivity and regulatory issues. Hackers and phishing attacks have time and again hurt the credibility of cloud-based networks even though companies like Salesforce.com have employed security measures like data encryption, Secure Socket Layer techniques, and firewalls to protect data.
There could be a downside of more than 10% to our estimate for Salesforce.com stock if its market share increases at a slower rate to reach 20% by the end of Trefis forecast period.