Salesforce CRM is rare in more ways than one. First, it’s an undervalued stock in an overvalued sector: It’s trading 16% below our fair value estimate while the technology sector overall looks overvalued. And while some companies now are figuring out how to use artificial intelligence in their businesses, Salesforce was an early adopter, launching its AI platform Einstein nearly a decade ago and more recently incorporating AI into Agentforce. The announced purchase of Informatica will only reinforce Salesforce’s AI platform. Salesforce makes Morningstar’s list of Stocks for the Next Stages of the Artificial Intelligence Boom. It’s also one of Morningstar Chief US Market Strategist Dave Sekera’s 6 Stocks to Buy in July for the Long Term.
After introducing the software-as-a-service model to the world, Salesforce has assembled a front-office empire that we think it can build on for years to come. The company has established itself as the clear leader in software for all aspects of the customer relationship journey. As Salesforce has matured and growth has slowed, profitability has improved and the capital allocation strategy has evolved. We think these factors should continue to compound good earnings growth. Salesforce is widely considered a leader in each of its served markets, which is attractive on its own, but the tight integration among the solutions and the natural fit they have with one another make for a powerful value proposition, in our view.
Key Morningstar Metrics for Salesforce
Stocks for the Next Stages of the Artificial Intelligence Boom
Morningstar’s Guide to Investing in Stocks
Economic Moat Rating
Salesforce’s wide economic moat arises primarily from switching costs, with network effect serving as a secondary moat source. By product line, we believe Sales Cloud, Service Cloud, and Salesforce Platform and other have earned wide moats, while Marketing Cloud, Commerce Cloud, and Data Cloud have carved out narrow moats. While the company’s professional services business, which is a small portion of revenue, helps facilitate software sales and contributes to customer relationships, we do not think it would warrant a moat on a stand-alone basis. We believe Salesforce is likely to earn returns in excess of its cost of capital over the next 20 years.
Read more about Salesforce’s moat rating.
Fair Value Estimate for Salesforce Stock
Our $325 fair value estimate implies a fiscal 2026 enterprise value/sales multiple of 7 times, an adjusted price/earnings multiple of 29 times, and a 4% free cash flow yield. We model a revenue compound annual growth rate of 8% through fiscal 2030, which we think will be driven by solid growth in all clouds. Our revenue forecast assumes modest acceleration after depressed growth in fiscal 2023 and 2024. We forecast non-GAAP operating margin expanding from 31% in fiscal 2024 to the upper 30s in fiscal 2030, which we think is consistent with management’s new profitability focus. We model several hundred million dollars in bolt-on acquisitions annually after a strategic shift away from inorganic growth.
Read more about Salesforce’s fair value estimate.
Risk and Uncertainty
We believe co-founder and CEO Marc Benioff would be difficult to replace, as he was an industry pioneer and has led the company to be a dominant force with a broad portfolio of sales and marketing solutions. We believe the most important metric for Salesforce investors is revenue growth. Therefore, continued deceleration in Sales Cloud, or growth that does not materialize as expected elsewhere, would likely have an adverse impact on the stock. Although it has pulled back from larger deals, we believe the company is likely to continue to make acquisitions, in which case valuation and integration will remain risks. Salesforce is likely to face new competitors as it continues to acquire its way into markets it was not previously serving.
Read more about Salesforce’s risk and uncertainty.
Salesforce Bulls Say
- Salesforce dominates salesforce automation but still only controls 30% in a highly fragmented market that continues to grow by double digits annually, suggesting there is room to run.
- The company has added legs to its overall growth story, including customer service, marketing automation, e-commerce, analytics, and AI.
- Management is likely to focus on expanding margins after years of subscale profitability.
Salesforce Bears Say
- It may be increasingly difficult for Salesforce to grow faster than its various end markets as it gets larger.
- Salesforce has entered new areas via acquisition and has arguably paid material premiums in the process. Integration risk is real, as is the risk of increasingly large, dilutive, or ill-conceived deals.
- The company’s generative AI strategy has been a series of fits and starts. While Agentforce looks promising, it may be just another iteration in an evolving approach.
This article was compiled by Susan Dziubinski and Sylvia Hauser. Data as of July 9, 2025.