Salesforce Stock Analysis: Just Sit Tight Until the Price Is Right

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Like many other tech firms, customer relations management software specialist Salesforce (NYSE:CRM) is making a move into the generative artificial intelligence market. Is this a smart move, or is Salesforce just a latecomer that’s desperately latching on to the gen-AI trend? This is a crucial question that you should seriously consider if you’re thinking about buying CRM stock.

In addition, prospective investors need to take a close look at Salesforce’s forward sales guidance. This, along with the company’s surprisingly high valuation, may dissuade you from taking a long position in Salesforce stock.

Salesforce and Gen-AI: Jumping on the Bandwagon

Not long ago, Salesforce announced a generative AI assistant called Einstein Copilot. As soon as I saw this, I immediately thought that Salesforce is late to the gen-AI trend and is jumping on an already crowded bandwagon. 

Even the product’s name indicates Salesforce is a trend follower, not a leader. After all, Einstein Copilot sounds a lot like Microsoft’s (NASDAQ:MSFT) Copilot gen-AI assistant.

One reporter described this phenomenon as tech firms having a “throw everything at the wall” gen-AI moment. The reporter didn’t mention Salesforce by name, but Einstein Copilot fits perfectly into the “throw everything” category.

Einstein Copilot would have been a groundbreaking, market-moving product if it had come out two years ago, or even one year ago. Now, however, it feels like Salesforce isn’t breaking any new ground at all.

Is CRM Stock Actually More Overvalued Than Nvidia Stock?

As you may already be aware, Nvidia (NASDAQ:NVDA) recently delighted the market with revenue guidance that exceeded analysts’ expectations. The same cannot be said about Salesforce, however.

Indeed, Salesforce most recently released quarterly financial report guided for fiscal 2025 revenue of $37.7 billion to $38 billion. This range falls short of Wall Street’s call for revenue of $38.62 billion.

That’s not a wide guidance shortfall, but it suggests that Salesforce might not post blockbuster sales numbers in the coming quarters. Yet, somehow the market has already assigned a highly elevated valuation to Salesforce.

How elevated? Put it this way: Salesforce’s GAAP-measured trailing 12-month price-to-earnings (P/E) ratio is 73.53x. For comparison, the sector median P/E ratio is 29.5x, and Nvidia’s P/E ratio is 66.31x.

Thus, according to this commonly cited metric, Salesforce is more richly valued than Nvidia. Some of you probably didn’t expect this, but the numbers don’t lie.

Salesforce Stock: Let It Fall Before You Make the Call

Don’t get the wrong idea. Salesforce is a leader in CRM software. However, the company definitely isn’t a first mover in the gen-AI trend.

Investors should wonder whether Salesforce really ought to have a higher valuation than Nvidia. So, finally, it makes sense to let CRM stock come down to a more favorable price point – such as $275 – before considering a long share position. 

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

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The post Salesforce Stock Analysis: Just Sit Tight Until the Price Is Right appeared first on InvestorPlace.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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