How much a stock's price changes over time is a significant driver for most investors. Not only can price performance impact your portfolio, but it can help you compare investment results across sectors and industries as well.
Another factor that can influence investors is FOMO, or the fear of missing out, especially with tech giants and popular consumer-facing stocks.
What if you'd invested in Salesforce.com (CRM) ten years ago? It may not have been easy to hold on to CRM for all that time, but if you did, how much would your investment be worth today?
Salesforce.com's Business In-Depth
With that in mind, let's take a look at Salesforce.com's main business drivers.
Headquartered in San Francisco, Salesforce, Inc., founded in 1999, is the leading provider of on-demand Customer Relationship Management (CRM) software, which enables organizations to better manage critical operations, such as sales force automation, customer service and support, marketing automation, document management, analytics and custom application development.
Salesforce is currently the largest CRM vendor in the world with a market share of nearly 20% according to reports of Gartner, a global research and advisory firm. Its nearest rival, SAP is way behind at a market share of around 8%. About 90% of the Fortune 100 companies uses at least one Salesforce software.
The company has leveraged its expertise in on-demand software to increase the scale of operations. It also offers a technology platform for customers and developers to build and run business applications.
Salesforce helps companies of every size and industry to connect with their customers in new ways through existing and emerging technologies including cloud, mobile, social, IoT and artificial intelligence (AI).
Rapid digital transformation and the company’s sustained focus on introducing more aligned products as per customer needs is driving its revenues higher. Over the last seven years, Salesforce’s annual revenues have quadrupled from $5.4 billion in fiscal 2015 to $26.5 billion in fiscal 2022.
There are two main revenue streams — Subscription and Support and Professional Services & Other.
Subscription revenues comprise subscription fees from customers, accessing the company’s enterprise cloud computing services (Cloud Services), software licenses and subscription fees recognized from customers for additional support beyond the standard support lent by the company. This segment accounted for more than 93% of Salesforce’s fiscal 2022 revenues.
Professional Services & Other revenues consist of fees that the company derives from consulting and implementation services and training. This segment accounted for the remaining 7% of Salesforce’s fiscal 2022 revenues.
While anyone can invest, building a lucrative investment portfolio takes research, patience, and a little bit of risk. If you had invested in Salesforce.com ten years ago, you're probably feeling pretty good about your investment today.
According to our calculations, a $1000 investment made in February 2013 would be worth $4,028.89, or a 302.89% gain, as of February 8, 2023. Investors should keep in mind that this return excludes dividends but includes price appreciation.
In comparison, the S&P 500 gained 175.87% and the price of gold went up 7.68% over the same time frame.
Analysts are anticipating more upside for CRM.
Salesforce is benefiting from a robust demand environment as customers are undergoing a major digital transformation. The rapid adoption of its cloud-based solutions is driving demand for its products. Its sustained focus on introducing more aligned products as per customer needs is driving its top-line. Continued deal wins in the international market is another growth driver. The acquisition of Slack would position the company to be a leader in enterprise team collaboration solution space and better compete with Microsoft’s Teams product. We expect CRM revenues to grow at a CAGR of 12.5% through fiscal 2023-2025. However, stiff competition is a concern. Besides, unfavorable currency fluctuations along with increasing investments in international expansions and data centers are an overhang on near-term profitability.
The stock is up 16.17% over the past four weeks, and no earnings estimate has gone lower in the past two months, compared to 2 higher, for fiscal 2023. The consensus estimate has moved up as well.
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