Salesforce Inc. (CRM): Why Should You Buy This Growth Stock For The Next 5 Years?

We recently compiled a list of the 15 Best Growth Stocks to Buy for the Next 5 Years. In this article, we are going to take a look at where Salesforce Inc. (NYSE:CRM) stands against the other growth stocks.

Kevin Mahn, President & CIO at Hennion & Walsh Asset Management, recently appeared on CNBC on January 6 to discuss the current market momentum and emphasize the need for investors to be selective in 2025 to find growth opportunities. He highlighted that while the MAG7 have led the market recently, their leadership may not continue. Mahn referenced historical data, noting that since 1950, there have been nine instances where the market rallied by 20% or more, with the market rising in eight of those cases. However, he pointed out that gains in the following year averaged only 3.6%, indicating a need for careful selection. He also acknowledged recent market trends, including a decline in the S&P 500’s performance and a potential shift in investor sentiment following events like the Santa Claus Rally.

He predicted a path of lower interest rates, expecting 50 basis points of cuts this year instead of the previously anticipated 100 basis points. Mahn suggested that this environment would create favorable conditions for stocks and bonds but urged investors to diversify beyond mega-cap tech stocks into sectors like biotech and aerospace. Earlier on January 3 as well, Mahn noted that after two consecutive years of gains, a third year of strong performance appears unlikely. He remarked that it seems the Grinch got in the way of the Santa Claus rally this year.

He also addressed concerns from investors tempted to time the market or sell their holdings. He warned against trying to time the market, describing it as often futile. Instead, he advocated for rebalancing portfolios to align with long-term goals and risk tolerance. He suggested that the economic landscape is changing, with lower interest rates and stagnant economic growth expected moving forward. Mahn advised investors to take profits from sectors that previously led the market and consider reallocating those funds into different areas poised for future growth. He highlighted biotech as a promising sector, noting bipartisan agreement on the need to lower drug prices. This shift could lead large-cap pharmaceutical companies to seek new revenue sources, making smaller biotech firms attractive.

Methodology

We first sifted through online rankings, and internet lists to compile a list of the top growth stocks to buy for the next 5 years. We then selected the stocks with high 5-year revenue growth and high analysts’ upside potential. From those we picked 15 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q3 2024.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

Salesforce (CRM) Bounces Back: Cramer Praises Agentforce’s Strong Growth Despite Analyst Doubts

A customer service team in an office setting using the company’s Customer 360 platform to communicate with customers.

Salesforce Inc. (NYSE:CRM)

Number of Hedge Fund Holders: 116

5-Year Revenue CAGR: 18.60%

Upside Potential as of January 15: 28.41%

Salesforce Inc. (NYSE:CRM) is a cloud-based software provider that specializes in customer relationship management (CRM) solutions. Its core offerings include Sales Cloud and Service Cloud, which integrate advanced AI capabilities. Its Data Cloud is well-positioned to capitalize on the growing AI trend, as businesses increasingly adopt AI-driven CRM strategies.

Salesforce Data Cloud is particularly important for AI transformations and is featured in 8 of the top 10 deals in FQ3 2025. 25% of Fortune 100 are Data Cloud customers, including IBM. The company uses IBM’s reach to boost Data Cloud adoption. Data Cloud has 1.9 trillion weekly AI transactions and 83.2 billion weekly workflows.

Constellation Research’s Ray Wang is of the opinion that software companies that use AI to serve customers who lack the expertise to develop their own AI solutions are rather important. However, analyst Gil Luria warns of modest near-term AI revenue impact due to pricing concerns and the company’s scale. Salesforce Inc. (NYSE:CRM) recently raised its FQ4 2025 revenue guidance to $9.9-$10.10 billion, representing a growth of nearly 8%.

The company’s growing AI integration is a key long-term driver. Columbia Threadneedle Global Technology Growth Strategy stated the following regarding Salesforce, Inc. (NYSE:CRM) in its Q2 2024 investor letter:

“In a tough backdrop for software companies, shares of Salesforce, Inc. (NYSE:CRM) cratered after the company reported quarterly results that surprised to the downside due to a tougher spending environment. The company reported revenue growth that missed on expectations, while also lowering its outlook for revenue growth, due to a more measured buying environment from its customers. Salesforce experienced elongated sales cycles, deal compression and elevated budget scrutiny, which pushed some deals to following quarters. Taking a step back, the company’s evolving AI story should not be overlooked as it is integrated across the company’s sprawling suite of cloud and digital assets.”

Overall CRM ranks 5th on our list of the best growth stocks to buy for the next 5 years. As we acknowledge the growth potential of CRM as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high 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.

READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.

Disclosure: None. This article is originally published at Insider Monkey.