In the crowded world of tech stocks, Salesforce quietly stands out. While many tech companies seem overpriced, Salesforce is trading about 16% below what experts consider its fair value—a rarity in today’s market. What makes Salesforce even more compelling is its long history with artificial intelligence. Unlike many firms just starting to explore AI, Salesforce launched its AI platform, Einstein, nearly a decade ago and recently integrated AI into its Agentforce solution. Plus, its recent move to acquire Informatica promises to strengthen its AI capabilities even further. Because of this, Salesforce is featured on Morningstar’s list of top stocks poised to benefit from the next wave of AI growth, and it’s one of six long-term picks recommended by Morningstar’s chief US market strategist, Dave Sekera.
Salesforce’s story goes beyond just pioneering the software-as-a-service (SaaS) model. Over the years, it has built an impressive ecosystem that manages every stage of the customer relationship journey. Although growth has naturally slowed as the company matured, its profitability has improved, and its strategy for using capital has evolved. This creates a solid foundation for steady earnings growth over the long haul.
Take Alice, a business executive in Paris, for example. When choosing a CRM platform for her company, she carefully weighed her options and ultimately went with Salesforce—not only because of its powerful customer management features but also because its AI tools enabled her team to better understand client needs and tailor their services accordingly. She notes that the AI technology significantly boosted her team’s customer satisfaction and sales performance.
One of Salesforce’s biggest competitive advantages comes from high switching costs—it’s tough for customers to jump ship once they’re invested. On top of that, Salesforce benefits from strong network effects. Core products like Sales Cloud and Service Cloud dominate their markets and seamlessly connect with each other, creating a powerful value proposition. While other offerings like Marketing Cloud, Commerce Cloud, and Data Cloud have narrower competitive moats, they still contribute important growth drivers.
Consider Mike, a tech entrepreneur in New York, who chose Salesforce to scale his business. He says Salesforce not only helped his team manage customer data more efficiently but also uncovered new market opportunities through advanced analytics. The platform’s deep integration meant his company could innovate and expand without costly new systems, saving time and resources.
From a financial standpoint, Morningstar values Salesforce at $325 per share, indicating upside potential from current prices. They project an 8% compound annual revenue growth rate driven by all its cloud services, alongside an improving profit margin expected to rise from 31% in 2024 to the high 30% range by 2030. Still, risks remain. Founder and CEO Marc Benioff’s leadership is vital, and any change at the top could impact the company. Salesforce’s aggressive acquisition strategy also brings integration challenges, especially with large deals.
Investors are split on Salesforce’s outlook. Bulls highlight its commanding 30% share in a rapidly growing CRM market, plus the company’s expansion into customer service, marketing automation, e-commerce, analytics, and AI—offering multiple growth engines. Bears worry that maintaining growth becomes harder as the company scales and that pricey acquisitions might weigh on returns. They also point out Salesforce’s AI initiatives have been a mixed bag so far, with promising but unproven results.
All told, Salesforce appears undervalued given its leadership in CRM and AI, strong competitive advantages, and thoughtful growth strategy. While challenges exist, patient long-term investors may find it a compelling opportunity in today’s tech landscape.