Salesforce.com, Inc. (NYSE:CRM) and Zendesk Inc (NYSE:ZEN) are California-based software companies that form the backbone for other companies’ operations.
While Salesforce focuses on customer relationship management (CRM), Zendesk is used by support desks and customer contact centers worldwide.
The both interact with your favorite companies, but from an investment standpoint, which is better between Salesforce vs Zendesk stock?
It turns out Zendesk was acquired in 2022 for $10.2 billion by an investor group led by Hellman & Friedman, so the only option now is Salesforce for retail investors.
Salesforce Revenues Still Climbing
Salesforce is a component of the Dow Jones Industrial Average (DJIA), S&P 500 (SPY) and S&P 100. Its cloud-based CRM platform helps companies maintain active customer databases and workflows, and it is easy to integrate with other enterprise tools.
Its technologies are sold as both a Platform-as-a-Service (PaaS) and Software-as-a-Service (SaaS) business models, and CEO Marc Benioff has been at the helm since co-founding the company in 1999.
The company generated revenues of $31.3 billion during the last twelve months, which represents an 18.3 percent year-over-year increase at a time when most companies are struggling to keep their doors open and pay employees.
Its earnings of $0.21 for 2022 compares poorly to the prior two years where the numbers came in at $1.48 (FY 2022) and $4.38 (FY 2021), respectively.
CRM has a P/E ratio of an astonishing 131x, which is jaw-droppingly high. Nonetheless, analysts have a target of $256 per share on it, suggesting considerable upside potential.
Will Salesforce Stock Face Headwinds?
Price targets from analysts range from $154 to $320 per share, though some feel it may be overpriced, especially with rising competition coming from the likes of Microsoft (MSFT), Oracle (ORCL), and SAP.
Our analysis of cash flows suggests that CRM has 42.7% upside to fair value of $303 per share.
Seasonally, the stock tends to perform relatively well throughout the year with the only period of weakness consistently showing up in September. That makes sense given the company has a subscription model, meaning revenues are quite predictable.
Zendesk Vs Salesforce Stock: The Bottom Line
Zendesk is no longer a publicly traded company so Salesforce is the only option for investors in this comparison set.
Salesforce does have significant upside potential according to analysts’ consensus as well as based on a discounted cash flow forecast analysis, though it would be wise to pay attention to the price-to-earnings multiple, which currently sits at a sky high level of 131x.
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