We recently published a list 10 Best Enterprise Software Stocks to Buy Now. In this article, we are going to take a look at where Salesforce, Inc. (NYSE:CRM) stands against the other enterprise software stocks.
Enterprise software is integral to the functioning of modern businesses, offering a range of applications designed to streamline and optimize various essential activities. These include enterprise resource planning (ERP), customer relationship management (CRM), business intelligence (BI), supply chain management (SCM), and more. The market is structured around eight core segments based on the functionality of the software: Business Intelligence Software, Content Management Software, Customer Relationship Management Software, eCommerce Software, Enterprise Performance Management Software, Enterprise Resource Planning Software, Supply Chain Management Software, and other specialized enterprise software solutions. The market’s evolution is driven by several key factors. Businesses worldwide are increasingly adopting digital transformation strategies, which are fueling demand for flexible, scalable, and user-friendly software solutions. Cloud-based software, or Software as a Service (SaaS), has become particularly popular due to its adaptability and ease of integration with other systems. Companies are also seeking software that can help them reduce costs, streamline operations, and improve their overall performance.
Geographically, the United States leads the enterprise software market, driven by the high demand for cloud-based solutions and the rapid adoption of artificial intelligence (AI) and machine learning technologies. In Europe, the market is propelled by the need for digital transformation and compliance with regulations such as the General Data Protection Regulation (GDPR). The Asia-Pacific region is experiencing growth due to the increasing adoption of cloud-based solutions and the rise of small and medium-sized enterprises (SMEs). In China, the market is dominated by domestic companies due to government restrictions on foreign firms, while in India, the market benefits from the proliferation of mobile devices and startups. Latin America’s market is driven by the need for regulatory compliance and efficient business management solutions.
The enterprise software market is influenced by various macroeconomic factors, including GDP growth, technological innovation, and government regulations. As businesses across the globe strive to stay competitive in an increasingly digital world, the demand for advanced software solutions continues to rise. The growing adoption of cloud-based platforms is particularly significant, as companies seek to enhance their flexibility while reducing operational costs. Additionally, government regulations play a crucial role in shaping the market, affecting the adoption of certain software types and the ability of foreign companies to operate in specific regions.
According to Statista, the Enterprise Software market is poised for remarkable growth in 2024, with revenue expected to reach a staggering $295.20 billion. At the forefront of this expansive market is Customer Relationship Management (CRM) Software, which alone is projected to generate $89.30 billion in revenue. The overall market is anticipated to continue its upward trajectory with a compound annual growth rate (CAGR) of 6.35% from 2024 to 2029, resulting in a projected market volume of $401.60 billion by the end of the forecast period. A key metric within the industry, the average spend per employee, is expected to reach $82.91 in 2024, underscoring the growing importance of enterprise software in driving business efficiency and productivity. The United States stands as the dominant player in the global market, with projected revenue of $150.50 billion in 2024, reflecting its leadership in innovation and technology adoption.
Enterprise Resource Planning (ERP) is increasingly recognized as a significant growth area within the broader Enterprise Software and Software-as-a-Service (SaaS) markets, particularly as more corporations begin upgrading their finance applications. This critical functional area has been somewhat neglected in recent years, but it is now gaining attention as businesses seek to enhance their financial management capabilities. Unlike other software segments where the public cloud has become the dominant delivery model, ERP within the enterprise software landscape is expected to see a more balanced adoption of both public and private cloud solutions. This hybrid approach allows enterprises to leverage the flexibility and scalability of the public cloud while maintaining the security and control offered by private cloud environments, which is crucial for managing sensitive financial data and complex business processes. The public-cloud ERP market, a key segment of the enterprise software industry, includes applications for finance, planning, procurement, and asset management, and is on track for substantial growth. According to IDC data, this market is projected to expand from $36 billion in 2021 to an impressive $73 billion by 2026, representing a strong annual growth rate of 15%. Despite its potential, ERP has been slower to migrate to the cloud compared to other types of enterprise software, with approximately 48% of ERP systems still operating on-premise. However, as large corporations increasingly seek deeper insights into their operations and the ability to scale efficiently, the push toward cloud-based ERP solutions is accelerating. This shift is driven by the need for more integrated and flexible systems that can adapt to the evolving demands of modern businesses.
Given the robust growth prospects and the vital role enterprise software plays in today’s business landscape, this article will explore the 10 best enterprise software stocks to buy now. These companies are well-positioned to capitalize on the ongoing digital transformation and the increasing reliance on sophisticated software solutions by businesses worldwide. Investing in these stocks offers an opportunity to participate in the growth of a dynamic and essential industry.
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A customer service team in an office setting using the company’s Customer 360 platform to communicate with customers.
Salesforce, Inc. (NYSE:CRM)
Average Analyst Share Price Target Upside: 11.38%
Average Analyst Share Price Target: $292.79
Salesforce, Inc. (NYSE:CRM), a leading player in the cloud computing industry, stands at number six on our list of ten best enterprise software stocks to buy right now. On August 16, BofA Securities raised its price target for Salesforce, Inc. (NYSE:CRM), from $288.00 to $316.00, while maintaining a Buy rating. Analysts believe the company’s strong free cash flow (FCF) growth justifies the optimism. Although revenue growth is projected to slow from 11% to 9% in fiscal 2025, Salesforce, Inc. (NYSE:CRM) is still expected to post a 25% FCF increase, driven by 22.5% growth in operating cash flow. Analysts also see potential productivity gains in sales and marketing boosting margins further. The new price target reflects a 22x multiple on estimated fiscal 2025 FCF, up from 16x previously. Salesforce, Inc. (NYSE:CRM) leadership in artificial intelligence (AI) is anticipated to provide a revenue boost. The company’s Data Cloud platform, integral to its AI strategy, continues to see strong adoption, with over 1,000 new customers in Q1. Salesforce, Inc. (NYSE:CRM) robust financials, including a 43% year-over-year increase in free cash flow to $6.1 billion, further solidify its position as a compelling long-term investment. The consensus among analysts remains optimistic, with a median price target of $292.79, suggesting a potential upside of over 11%.
Polen Focus Growth Strategy stated the following regarding Salesforce, Inc. (NYSE:CRM) in its Q2 2024 investor letter:
“Salesforce, Inc. (NYSE:CRM) declined nearly 20% due to a slowdown in revenue and bookings growth, part of a wider trend we’ve observed across enterprise software as companies defer spending on large projects given the uncertain macroeconomic environment. As mentioned, there has been an emerging narrative about prioritized spending on AI, cloud, and security over enterprise software spending that could eventually impair seat-based software over the longer term. Though there may be some near-term shifts in dollars toward GenAI, we believe the market for mission-critical enterprise software will remain robust well into the future. We will monitor the position closely, but we continue to believe that Salesforce is well-placed with its mission-critical software and high customer retention rates to weather these headwinds, lean on pricing power, and effectively monetize generative AI in its product suite.”
Overall CRM ranks 6th on our list of the best enterprise software stocks to buy. While we acknowledge the potential of CRM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CRM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
