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 thing that can drive investing is the fear of missing out, or FOMO. This particularly applies to 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.
Salesforce 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.
Headquartered in San Francisco, Salesforce, Inc. was founded in 1999. Over the course of two and a half decades, the company has established itself as the world's leading CRM vendor with a market share of nearly 20%, according to the 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 aligning products with customer needs are driving the top line. Salesforce’s annual revenues have sextupled from $5.4 billion in fiscal 2015 to $31.4 billion in fiscal 2023.
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. This segment accounted for more than 93% of Salesforce’s fiscal 2023 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 2023 revenues.
Anyone can invest, but building a successful investment portfolio takes a combination of a few things: research, patience, and a little bit of risk. So, if you had invested in Salesforce.com a decade ago, you're probably feeling pretty good about your investment today.
According to our calculations, a $1000 investment made in January 2014 would be worth $4,692.28, or a gain of 369.23%, as of January 22, 2024, and this return excludes dividends but includes price increases.
Compare this to the S&P 500's rally of 163.22% and gold's return of 57.67% over the same time frame.
Looking ahead, analysts are expecting more upside for CRM.
Salesforce is benefiting from a robust demand environment as customers are undergoing a major digital transformation. The company’s sustained focus on aligning products with customer needs is driving the top line. Continued deal wins in the international market are another growth driver. The buyout of Slack has positioned the company as a leader in enterprise team collaboration and improved its competitive standing versus Microsoft Teams. Salesforce’s strategy of continuously expanding generative AI offerings will help the company tap the growing opportunities in the space. Our estimates suggest that Salesforce revenues will grow at a CAGR of 10% through fiscal 2024-2026. However, stiff competition and unfavorable currency fluctuations are concerns. Also, the challenging macroeconomic environment could hurt its growth prospects.The stock has jumped 5.46% over the past four weeks. Additionally, no earnings estimate has gone lower in the past two months, compared to 17 higher, for fiscal 2024; the consensus estimate has moved up as well.