Buy or Sell Salesforce Stock?

Salesforce (CRM) stock has fallen 5.3% during the past day, and is currently trading at $239.27. We believe there is not much to fear in CRM stock given its overall Strong operating performance and financial condition. This is aligned with the stock’s High valuation because of which we think it is Fairly Priced.

Below is our assessment:

Is holding CRM stock risky? Of course it is. High Quality Portfolio mitigates that risk.

Let’s get into details of each of the assessed factors but before that, for quick background: With $229 Bil in market cap, Salesforce provides customer relationship management technology and the Customer 360 platform, enabling businesses across various industries to deliver connected and collaborative customer experiences globally.

[1] Valuation Looks High

This table highlights how CRM is valued vs broader market. For more details see: CRM Valuation Ratios

[2] Growth Is Moderate

• Salesforce has seen its top line grow at an average rate of 10.5% over the last 3 years
• Its revenues have grown 8.3% from $36 Bil to $40 Bil in the last 12 months
• Also, its quarterly revenues grew 9.8% to $10 Bil in the most recent quarter from $9.3 Bil a year ago.

This table highlights how CRM is growing vs broader market. For more details see: CRM Revenue Comparison

[3] Profitability Appears Strong

• CRM last 12 month operating income was $8.4 Bil representing operating margin of 21.2%
• With cash flow margin of 33.3%, it generated nearly $13 Bil in operating cash flow over this period
• For the same period, CRM generated nearly $6.7 Bil in net income, suggesting net margin of about 16.9%

This table highlights how CRM profitability vs broader market. For more details see: CRM Operating Income Comparison

[4] Financial Stability Looks Very Strong

• CRM Debt was $11 Bil at the end of the most recent quarter, while its current Market Cap is $229 Bil. This implies Debt-to-Equity Ratio of 4.9%
• CRM Cash (including cash equivalents) makes up $15 Bil of $98 Bil in total Assets. This yields a Cash-to-Assets Ratio of 15.8%

[5] Downturn Resilience Is Moderate

CRM saw an impact slightly better than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• CRM stock fell 58.6% from a high of $309.96 on 8 November 2021 to $128.27 on 16 December 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 1 March 2024
• Since then, the stock increased to a high of $367.87 on 4 December 2024 , and currently trades at $239.27

 
2020 Covid Pandemic

• CRM stock fell 35.7% from a high of $193.36 on 20 February 2020 to $124.30 on 16 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 6 July 2020

 
2008 Global Financial Crisis

• CRM stock fell 70.5% from a high of $18.61 on 23 June 2008 to $5.49 on 19 November 2008 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 29 December 2009

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read CRM Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.