We recently published a list of Top 10 AI Stocks Investors are Talking About in October. Since Salesforce, Inc. (NYSE:CRM) ranks 8th on the list, it deserves a deeper look.
Venu Krishna, Barclays head of U.S. equity strategy, said while talking to CNBC in a latest program that he is not revising his S&P 500 year-end projection of 5,600 because he believes stock valuations are “full.”
“If you see what’s happening, numbers (earnings) have been cut sharply going into the end. What is still anchoring the market is big tech, even though their earnings themselves are kind of decelerating. Then seasonality comes into play. October is the weakest month, and you don’t want to get ahead of that.”
Asked whether he does not believe the market really broadened out, Krishna said while there were some signs of market broadening, the “anchor” of the rally remains big tech, which according to him, are just six stocks.
Moving beyond the earnings and valuations debate, another factor still impacting investor sentiment is the Federal Reserve’s next moves.
Talking about the latest Fed minutes released October 9, Wolfe Research’s Stephanie Roth said on CNBC that a “substantial” majority of Fed officials wanted a 50-basis-point rate cut. However, she said in the next meeting, a 50bps rate cut is “off the table.”
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Salesforce Inc (NYSE:CRM)
Number of Hedge Fund Investors: 117
Salesforce Inc (NYSE:CRM) recently introduced Agentforce, a platform allowing customers to deploy autonomous AI agents for various tasks. According to Wedbush, this new tool is gaining traction among Salesforce’s core clients and will be generally available on October 25.
“Based on recent checks and after a plethora of conversations with customers at Dreamforce, the company’s AI strategy is now resonating well among its core customer base by providing an agent-first ecosystem that interacts with customers and employees across applications for a wide array of use cases while providing an extended omni-supervisor to track what agents do with humans,” noted Wedbush analysts, led by Daniel Ives, in a recent investor note.
Wedbush reiterated its Outperform rating on Salesforce Inc (NYSE:CRM) and raised the price target to $325 from $315. “One of the biggest initiatives in the field is around monetizing the AI theme within the CRM massive installed base as we believe this is a major land grab opportunity that could significantly benefit CRM over the coming years and could increase overall revenue by $4B-plus annually based on our estimates and field work by CY2025,” Ives added.
Wedbush sees Salesforce as a key beneficiary of the AI boom and expects its stock to rise by around $40 over the next 12 to 18 months as its AI strategy solidifies.
In the second quarter, Salesforce’s revenue rose 8% year over year while gross profits jumped 10%.
Salesforce Inc (NYSE:CRM) is also on investors’ radar because of its acquisitions. The company recently agreed to acquire AI voice agent firm Tenyx. This acquisition follows Salesforce’s strategic partnership with Workday to develop an AI-powered assistant for employees. The company has also agreed to buy SaaS data protection startup Own for $1.9 billion in cash.
Wall Street expects $11.12 per share in profits for Salesforce Inc (NYSE:CRM) next year, representing a 10% year-over-year increase. For the current financial year, profits are expected to grow by 23%, with estimates trending upwards. Based on these forecasts, Salesforce trades at a forward price-to-earnings ratio of 22, which is attractive given the AI-related growth catalysts.
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, Salesforce, Inc. (NYSE:CRM) ranks 8th on Insider Monkey’s list titled Top 10 AI Stocks Investors are Talking About in October. While we acknowledge the potential of Salesforce, Inc. (NYSE:CRM), our conviction lies in the belief that 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.
