THIS AI STOCK ISN’T SEXY ANYMORE — AND THAT’S WHY I LOVE IT
(CRM)
I've seen enough tech bubbles pop to know that when the air starts hissing out, most investors hit the exits faster than a cat at a dog park. But that's often when the real fortunes get made — hidden behind a wall of boring fundamentals and (gasp!) actual profitability.
Welcome to the curious case of Salesforce (CRM).
Lately, Salesforce has been wobbling around like your buddy who insisted he "was fine" after a third spin on the teacup ride. CRM shares are down about 15% since January, mirroring the broader tech malaise. Checking your portfolio these days feels like opening a mystery Tupperware from the back of the fridge: you know it won't be good.
But before you bolt, let's peel back the layers.
The days of Salesforce dazzling us with steroidal growth numbers are fading in the rearview, along with our "lockdown" ambitions to learn Italian or master sourdough. Last quarter, Salesforce delivered 8% revenue growth to $10 billion. Respectable for most, sure. But for Salesforce? That's like seeing Usain Bolt clock a 12-minute mile.
The AI-fueled growth story, once hotter than a sidewalk in July, has cooled considerably. Analysts have moved from "rabid optimism" to "meh" faster than you can say "pivot." But here’s the twist: Salesforce might be shedding its adolescent growth phase in favor of something the market could crave even more — a cash flow machine with expanding margins.
Last quarter, Salesforce posted $2.78 in non-GAAP EPS, comfortably topping guidance. Think of it like promising your friend you'll be there at 8:00—and showing up at 7:45 with coffee and donuts. CRM is growing up, and growing up, my friends, can be lucrative.
The company ended the quarter with $14 billion in cash and $8.4 billion in debt. That’s the corporate equivalent of having an umbrella, raincoat, and a canoe ready for a 20% chance of showers. In uncertain times, that kind of balance sheet isn't just nice—it's a lifeboat.
Across its sprawling empire, Salesforce showed steady progress. Slack revenue growth accelerated to 11%, which is impressive for an acquisition some had already written off. Tableau, meanwhile, lumbered along at 3% growth, the corporate equivalent of, "Well, the teacher made the test really hard."
Guidance for the first quarter? Up to 7% revenue growth. For the full year? Up to 8%. Oh, and Q1 will get dinged by the leap year—proving that in 2025, even something as archaic as the Gregorian calendar can mess with earnings.
Management is also trying to reframe the story around AI agents. Customers using Agentforce are reportedly handling 30-60% of service cases with AI. The jury’s still out on whether this is a rocket booster or just a shiny hood ornament. But it does make customer retention stickier than a melted lollipop in a toddler's hand.
At around 24x earnings, Salesforce isn't dirt cheap, but it's not living in the stratosphere either. Consensus forecasts call for an acceleration back to high-single-digit growth over the next five years. Personally, I'm more skeptical of those forecasts than I am of "fat-free" cookie labels.
Decelerating growth is the natural gravity of mature companies — it's not "if," it's "when." That said, I see Salesforce sustaining 35%-40% net margins. If so, fair value multiples could float between 18x to 22x earnings over time. That pencils out to solid double-digit annual returns, even without multiple expansion. Any multiple boost would be like finding a $20 bill in your ski jacket next winter — sweet, but not essential.
Risks? Of course. Revenue misses could trigger tantrums worthy of a three-year-old denied ice cream. Generative AI could also disrupt the field, though history suggests incumbents like Salesforce tend to survive — and even thrive — through tech revolutions.
In short: Salesforce has graduated from growth wunderkind to cash flow powerhouse. It may no longer be the life of the tech stock party, but when the glitter fades, it's the companies with real earnings and loyal customers that still have seats at the table.
Remember, bubbles come and go. Balance sheets and bored markets? That’s where fortunes are built. Bet smart — bet boring.
