Why Salesforce Is a Buy Despite Market Volatility

The stock market is bumpy right now, and many investors are growing anxious about what the future holds.

The Magnificent 7 stocks tumbled recently and that has some wondering if a rotation from big tech to small and medium caps is in progress. 

To highlight the disparity between the biggest stocks and the rest of the market, a CBOE measure of implied correlation for the top 50 stocks in the S&P 500 just hit its lowest point ever.

Essentially, this difference indicates that big companies are trading independently while smaller companies are behaving in a more synchronized manner. The primary concern is that if these connections re-align that the market ups and downs will be far more pronounced and most investors are not prepared for that scenario.

Artificial intelligence has been a game-changer in causing this disperion with NVIDIA Corporation (NASDAQ:NVDA), the poster child, rising 137% this year alone. This increase has boosted the S&P 500 despite the fact that almost 40% of S&P 500 stocks have gone down. This illustrates the uneven movement in the present market.

So how does this all relate to Salesforce and what’s going on with it?

Salesforce Is a Rock In The Storm

During periods of unconventional market behavior like this one, seasoned investors typically move towards fundamentally strong stocks like Salesforce, Inc. (NYSE:CRM).

Salesforce is well-known for its powerful data handling, and its expansive front-office business tools make the platform appealing across industries for companies of all sizes, and create high demand for it.

CRM’s stock price has increased by more than 13% over the past year but is fairly flat for the year, lagging the major market averages.

Historically, the company’s steady growth has offered protection against market unpredictability, making Salesforce a trusted investment option.

That revenue predictability has contributed to Salesforce holding the #1 CRM spot in the world by market share for 11 years straight. As the top CRM provider, Salesforce currently handles an astonishing 250+ petabytes of data for its clients.

Its strong position in the market, coupled with dependable performance, makes Salesforce a somewhat safer choice for investors who want to minimize risk.

What Is Driving Salesforce Growth?

One growth driver for Salesforce has been its adoption of artificial intelligence. Salesforce launched an AI helper that supports businesses with daily marketing and merchandising jobs in addition to the sales and service tasks it already supports. In May, the company expanded its Einstein Copilot capabilities to include new features for marketers and shop owners. 

It also introduced new tools that combine business and commerce data. One such tool is a strong AI-based personalization decision engine that improves the connections between businesses and their customers.

These improvements ensure Salesforce stays at the cutting-edge of customer relationship management software and, by expanding the scope of Einstein Copilot through integration with data management tools, Salesforce adds a growth lever.

10 Billion Reasons To Own Salesforce

In the first fiscal quarter of 2025, which wrapped up on April 30, 2024, total revenues rose by a respectable 10.7% year-over-year to $9.13 billion. Gross profit climbed by 13.9% from the prior year’s quarter to $6.97 billion.

Salesforce’s non-GAAP net income went up by a whopping 43.8% from last year and now sits at $2.41 billion.

Meanwhile cash inflows from operations rose by an astonishing 39.1% compared to last year’s quarter, reaching $6.25 billion. 

Turning to the balance sheet, cash and cash equivalents sat a smidge under $10 billion, up from the $8.47 billion noted on January 31, 2024. 

Why Analysts Are Upbeat

For the fiscal year 2025, Salesforce management has forecast revenues of between $37.7 billion and $38 billion.

If the company can meet those expectations, it would translate to an 8% to 9% increase when compared to last year’s results.

Other guidance provided by Salesforce leadership includes subscription and support revenue to grow by an estimated 10% in constant currency for the same period.

The fiscal year non-GAAP operating margin is expected to come in at roughly 32.5%, a rise of 200 basis points versus last year.

Is Salesforce Profitable?

Even the most impressive financial results are meaningless for investors if Salesforce can’t turn a profit. That leaves the big question, is Salesforce profitable? The answer is a resounding yes. Not only is Salesforce profitable but it also surpasses industry averages by quite a bit.

The company reported a trailing-12-month gross profit margin of 76%, a hugely impressive figure that surpasses the industry average of 49.07% by approximately 54.9%.

Also, Salesforce has a trailing-12-month EBITDA margin of 25.74%, which is over 2.5x higher than the sector’s average of just 9.82%.

The company also has a trailing 12-month net income margin of 15.3% and cash from operations sits at an eye-popping $11.99 billion while the sector average is a mere $93.30 million.

What Is Going On With Salesforce Stock?

Salesforce is launching new products such as Einstein Copilot that are designed to keep revenues and profits growing while embracing artificial intelligence to deter competitors.  

For the fiscal year that will end in January 2025, the company’s revenue is predicted to grow by 8.6% when compared to the prior year’s $37.86 billion. Earnings per share are expected to rise by 20.4% year-over-year to $9.90.

Investors can take solace that the company has beaten expected EPS numbers in all of the last four quarters. For the next fiscal year ending January 2026, revenues and EPS are projected to increase by 9.4% and 11.3% year over year to $41.40 billion and $11.01, respectively.

With this said, analysts have projected a target Salesforce stock price of $300.19, which translates to a 17.18% from the current price. In short, all factors indicate that Salesforce stock is a strong buy despite market volatility.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.