Salesforce stock price is firing on all cylinders, making it one of the best-performing companies in the Dow Jones Industrial Average. It has risen in the past ten consecutive weeks, its longest winning streak since 2017. As a result, it has jumped to a record high, giving it a market cap of over $307 billion.
Salesforce stock price stages a massive comeback
CRM stock price has done well in the past few months, ending one of its treacherous periods when it crashed to a low of $126.20 in 2023. At the time, several activist investors like Starboard and Elliot Management intervened and pushed substantial changes.
Salesforce slowed down its acquisitions trends and also announced substantial layoffs in a bid to boost efficiency and increase profits.
Recently, however, the stock has been in a strong bull run and is sitting at its all-time high, as we predicted earlier this year. On the weekly chart, we see that the CRM share price has been in a strong bull run, crossing the important resistance level at $316.65, its highest swing in February this year.
By moving above that level, Salesforce stock has invalidated the double-top pattern that was forming and whose neckline was at $211.3, its lowest point on May 28.
CRM shares have remained above all moving averages, while the Relative Strength Index (RSI) and the MACD indicators have all pointed upwards.
Therefore, using trend-following principles, the stock’s outlook is bullish, with the next point to watch being at $400, implying a 17% jump from the current level. On the flip side, a drop below the key psychological point at $280 will invalidate the bullish view.
CRM chart by TradingView
Strong growth and artificial intelligence
The Salesforce stock price has jumped sharply, helped by its investments in artificial intelligence. It has inked a long-term partnership with NVIDIA, the biggest company in the world.
Also, it recently launched AgentForce, its AI solution that helps companies create their autonomous AI agents. Some of the firms using AgentFirce are Wiley, OpenTable, and Saks.
The most recent financial results showed that Salesforce’s revenue rose by 8% to $9.33 billion. Most of its revenue growth was in its subscription and support divisions, which grew by 10%. This growth, was however, weaker than the 12% it grew in the same period last year.
Salesforce also continued to return funds to its shareholders. It repurchased stock worth $4.3 billion in the second quarter and $0.4 billion in dividends.
Read more: Salesforce announces first-ever dividend as Q4 earnings beat expectations
CRM believes that its business will continue doing well. It expects that its third-quarter revenue will be between $9.3 billion and $9.36 billion. If that is correct, its annual revenue will be between $37.7 billion and $38 billion.
Analysts expect the upcoming earnings to show that its revenue rose to $9.3 billion, while its annual figure will be $37.86 billion. CRM has a long track record of beating analysts’ estimates. For example, its last earnings per share was higher than estimates by 20 cents.
A key concern is that Salesforce stock price is severely overvalued. It has a forward price-to-earnings ratio of 52.57, much higher than the sector median of 30.6. This makes it more valuable than companies like Nvidia and Microsoft which are growing at a faster rate.
The best approach to value a SaaS company is known as the rule of 40, which looks at the growth trends and its margins. In Salesforce’s case, it has a net income margin of 15.4% and revenue growth of 8%, giving it a figure of 23%. This means that the firm is severely overvalued since the ideal figure is usually 40 and above.
Salesforce stock price will likely continue doing well if the company publishes strong financial results. Its next earnings will come out on November 27.
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