Salesforce - CRM's cutting edge, or soon even more so?

Sijoittaja-alokas · September 1, 2024, 11:14am

Salesforce, Inc. is an American cloud-based software company headquartered in California. The company offers customer relationship management (CRM) software and applications focused on sales, customer service, marketing automation, e-commerce, analytics, and application development, etc.

Salesforce was founded in February 1999 by former Oracle executive Benioff. The company grew rapidly and went public on the New York Stock Exchange in 2004. Today, Salesforce is one of the world’s largest software companies. In 2023, the company ranked 491st on the Fortune 500 list, with a revenue of $31 billion.

Salesforce’s most well-known event is the annual Dreamforce conference, first held in 2003. Over the years, the company has expanded its product portfolio and launched several significant services, such as Service Cloud in 2009 and the Trailhead learning platform in 2014. In 2020, Salesforce was added to the Dow Jones Industrial Average index, making it one of the most significant technology companies in the United States.

In 2021, Salesforce completed its largest acquisition when it acquired the Slack collaboration platform for $27.7 billion. With this acquisition, the company strengthened its position in the business application market. Salesforce has continued to innovate and in 2024 introduced a new AI-powered application called Einstein Copilot for healthcare needs.

In recent years, Salesforce has faced some challenges, as evidenced by layoffs and management changes. Last year, the company announced it would reduce its workforce by approximately 10% as part of a restructuring. On the other hand, despite this, Salesforce continues to grow and focus on innovation.

Investor’s Perspective:

Salesforce is one of the world’s largest software companies, and its position in the CRM market is strong. In recent years, however, the company has faced challenges, and its stock value has fallen significantly from its peak.

Salesforce’s valuation is currently considered low by some, and the company’s free cash flow yield is high, which does not necessarily mean that the company is an undervalued investment, as a bearish view might suggest. The company has at least partially pulled itself together under pressure from various investor groups, leading to a reduction in stock-based compensation, which some believe indicates problems in the company’s governance.

Salesforce has continued to grow, and its financial indicators are strong, but despite these figures, it is important to note that competition in the CRM market is extremely fierce. The company dominates the market and has a significant market share, but its competitors are constantly developing new and attractive alternatives that could threaten its position in the long run.

The company’s strong margins and cash flow may give it room to maneuver, but it is worth considering how sustainable its business model is in a changing economic environment, as competitors innovate aggressively. Salesforce has made many share buybacks, but this may not be a long-term solution if the company’s growth slows or the markets become even more challenging.

For now, it can be said that Salesforce is financially stable and its market position is strong, but it is also important to consider the risks and challenges the company may face in the future. These include, among others, the aforementioned fierce competition and questions about governance practices. Therefore, the company’s future prospects are not unambiguously positive, and this worries investors. It is not enough that the numbers look good now if it is felt that the company may not be sufficiently prepared for the rise of competitors and potential internal problems.

It would be nice to get concrete understanding and insight into why it is thought that Salesforce’s competitors are getting closer to Salesforce. However, on the other hand, I have understood that the “product/platform” has been successful in its ease of use and flexibility. And what and what kind of problems there have been in governance, given the turnover and the addressing of stock-based compensation.

Q2/2024

https://x.com/EconomyApp/status/1828888998254891172

Reading Material from company pages.

(Fiscal Year ended January 31, 2024 )

Gadus · September 1, 2024, 11:28am

Näyttökuva 2024-09-01 kello 14.22.43

The stock-based compensation for this company has somehow caught my eye. You get a quite misleading picture of the valuation level if you just blindly stare at the non-GAAP figures.

Roope_K · September 1, 2024, 1:52pm

I have experience with Salesforce as a user and as an analyst/consultant. As a user, I have no complaints—the user experience is really good, at least as a sales tracking and management tool. My exposure to the marketing side is more limited, but the campaign features I have used, for example, are quite handy.

From an analyst’s perspective, however, there are reasons why Salesforce as an investment doesn’t move the needle for me at all. If you consider, for example, an average Finnish manufacturing company that has its ERP and other systems in place (e.g., Microsoft, SAP, etc.), it is quite rare to find anything in Salesforce so revolutionary that it would justify the rather high implementation and operating costs, or, for instance, acquiring entirely new technology as an extension of the existing stack. Quite often, it is simply easier to deploy a CRM module from a competitor’s platform solution (e.g., D365 Sales).

The fact that Salesforce is an expensive, standalone CRM significantly limits its customer potential and allows competitors to succeed with inferior products without even having to compete much on license pricing.

Jussi_P · October 17, 2024, 9:27am

Does anyone have experience with Salesforce’s new Agentforce AI features? Benioff is hyping it up even more than usual, and that’s saying a lot.

https://www.fastcompany.com/91208578/why-marc-benioff-is-all-in-on-ai-agentforce

I’ve heard from the market that a couple of top 50 Finnish companies are building B2B e-commerce on top of Salesforce, which is a bit surprising.

Jussi_P · November 6, 2024, 8:15pm

Benioff is hyping AI agents again. Some pretty good examples. The stock price has also been drifting upwards week after week.

https://x.com/TechFundies/status/1854245135841890677

Sijoittaja-alokas · December 4, 2024, 6:02am

Salesforce reported stable growth in its core business, and profitability improved due to operational efficiency.

The most significant development is related to AgentForce, which is in its early stages but has received positive feedback and could significantly grow the company’s business over time.

Segments such as sales and service clouds have shown signs of stabilization before the full impact of this AgentForce. Geographically, growth in the United States slowed, but growth remained strong elsewhere.

The Q4 outlook is quite good, and investments related to artificial intelligence are expected to be covered by cost savings. The company is investing in growth potential by hiring more sales representatives and expanding its AI tools. The number of shares will decrease due to share buybacks.

https://x.com/EconomyApp/status/1864059847089766488

https://x.com/StockMarketNerd/status/1864059951909318716

Sijoittaja-alokas · December 5, 2024, 10:42am

This tweet also provides some historical information, quite neat work.

https://x.com/carbonfinancex/status/1864313513834918332

Sijoittaja-alokas · January 6, 2025, 11:55pm

The tweet below discusses how Salesforce has significantly expanded into agentic AI under the leadership of Marc Benioff.

The company has strengthened its ecosystem by acquiring MuleSoft, Tableau, and Slack. Agentic AI, such as the new Agentforce, automates complex tasks using large language models, which streamlines workflows and frees up employees for more demanding tasks.

Companies like IBM and Accenture are leveraging Agentforce, and the agentic AI market is expected to grow to $367.68 billion by 2033. Salesforce is well-positioned to benefit from this development thanks to its innovative solutions and partnerships.

https://x.com/moneyballinvest/status/1876312761187410413

Sijoittaja-alokas · January 15, 2025, 8:42pm

The tweet discusses how AI challenges Salesforce by transforming unstructured data (e.g., calls, emails) directly into “insights” (useful information, etc.) without traditional CRM systems.

He believes that as workflows move closer to customers, Salesforce may lose its relevance, meaning that when AI can process and leverage these direct customer interactions without needing to input data into a CRM system, Salesforce may lose its role as an essential system. Consequently, Salesforce would no longer be as significant for businesses as before.

https://x.com/sv_techie/status/1879052373001400730

Sijoittaja-alokas · February 24, 2025, 5:13pm

Google and Salesforce have entered into a $2.5 billion cloud service agreement for seven years.

Salesforce’s Agentforce will migrate to Google Cloud, and additionally, the companies’ services will integrate more closely. Google’s Gemini AI will also support Agentforce.

https://x.com/EconomyApp/status/1894053787750310044

Sijoittaja-alokas · February 26, 2025, 9:49pm

Salesforce exceeded EPS expectations, but revenue fell slightly short of market forecasts.

The company has significantly grown its AI and data services, and their annual recurring revenue has risen sharply. Cash flow and profitability have improved, and cost-saving measures are also reflected in strong earnings performance.

The company’s cash flow was reportedly at a record level, as was its operating margin. But, but… many felt that the near-term outlook was not pleasant enough, which has raised concerns among investors about slowing growth.

In the long term, Salesforce has succeeded in strengthening its position in leveraging AI and data, the number of large enterprise customers is growing, and the company’s strategic direction appears promising, but short-term growth forecasts are more moderate.

https://x.com/CmgVenture/status/1894859993553285507

Sijoittaja-alokas · February 27, 2025, 11:05am

Here’s some more reading material about Salesforce, visualized.

https://x.com/EconomyApp/status/1894859297995280808

Sijoittaja-alokas · April 1, 2025, 9:28pm

Here are some highlights from Salesforce.

Salesforce dominates the CRM market; Service Cloud holds a 44.9% market share, and cloud-based CRM holds 42%.

The company revolutionized the cloud service model and maintains the AppExchange ecosystem with over 8,000 applications, supporting over 150,000 customers. American and international staff are evenly distributed, fostering global expansion.

https://x.com/BourbonCap/status/1905975292176314600

Strong praise, as almost always on X. I can’t assess the company’s valuation, well, I can’t assess any company’s valuation.

https://x.com/GARRlS0N/status/1906800211835642211

Chuckecheese · April 5, 2025, 7:54am

https://investor.salesforce.com/financials/sec-filings/sec-filings-details/default.aspx?FilingId=18349778

salesfroceosto

Salesforce insiders seem to be liking these levels already. A pretty good-sized stake acquired for almost a million dollars. Perhaps those AI agents will indeed start selling well, just as Jensen promised?

Sijoittaja-alokas · April 13, 2025, 7:08am

Salesforce acquired Spiff for $374 million to strengthen incentive management.

Spiff is estimated to bring in an additional $50–100 million in revenue, and the company also launched AI-powered customer service solutions, such as Agentforce and Einstein Copilot.

This was excerpted from a tweet thread themed “Here are 10 stocks worth owning for the next 20 years:”.

https://x.com/BourbonCap/status/1911064355690422730

Sijoittaja-alokas · April 17, 2025, 12:47pm

In the tweet below, Salesforce has maintained its position as a top name in cloud software by developing a unified platform that covers sales, customer service, marketing, and analytics.

The company has expanded its expertise through strategic acquisitions and is now investing in AI, for example, with the Agentforce solution.

The tweeter also states that, financially, Salesforce has shifted to profitable and disciplined growth.

https://x.com/samsolid57/status/1912502528815562784

Sijoittaja-alokas · April 21, 2025, 10:34pm

The tweet highlights that ServiceNow’s “Rule of 40” is now 53.5%, which indicates strong growth and good financial performance relative to its size.

This supports a higher valuation compared to slower-growing peer companies. The rule will slightly decrease over time but will remain strong.

https://x.com/qualityequities/status/1914070913248620938

(AI explained: The “Rule of 40” is a rule of thumb for SaaS companies. According to it, revenue growth and profit margin combined should be at least 40 percent.)

Sijoittaja-alokas · May 10, 2025, 9:58pm

Sale and Palle in comparison, this tweet “considers” whether revenues + operational inflows are in good shape compared to market value.

https://x.com/finchat_io/status/1920162976172220842

Sijoittaja-alokas · May 17, 2025, 6:14pm

In the tweet below, Salesforce is assessed as attractively priced in relation to its history of free cash flow and earnings per share.

The company’s forward P/E ratio is about 24, its FCF yield is 3.5 percent, and its five-year revenue compound annual growth rate (CAGR) is 15.55 percent.

A responder to the tweet considers ServiceNow a better company with better technology, even if Salesforce is valued more affordably. The tweeter, in turn, responds that ServiceNow focuses more on internal processes and project management, whereas Salesforce’s strength lies in customer communication and sales pipeline management – meaning the companies have differences, even though there is some overlap, so they are not direct comparables.

https://x.com/wealthmatica/status/1921001728612147586