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Salesforce (CRM) Rises 6% in a Week: What Should Investors Do Now?
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Salesforce, Inc. (CRM - Free Report) shares saw an impressive 6.1% increase last week, standing out against the broader Zacks Computer – Software industry, which dipped 1.3%. The stock also outperformed the Zacks Computer and Technology sector and the S&P 500, which fell by 2.7% and 1.1%, respectively. This notable rise has sparked investor interest, prompting many to reconsider their stance on the stock. So, should you buy, hold or sell Salesforce now?
One-Week Price Performance
Image Source: Zacks Investment Research
Strengthening Market Position
Salesforce continues to dominate the customer relationship management (CRM - Free Report) market, going head-to-head with tech giants like Microsoft, Oracle and SAP. Its extensive suite of CRM applications and a robust partner ecosystem give it a significant edge. Gartner consistently ranks Salesforce as a leader in the CRM space, highlighting its strong market presence.
A key part of Salesforce's strategy is its targeted acquisitions that enhance its technological capabilities and market reach. The 2021 acquisition of Slack for $27.7 billion is a prime example of integrating communication and collaboration tools into its CRM platform and driving cross-sell opportunities. In 2023, the acquisitions of startups Spiff and Arikit.ai further strengthened Salesforce's market position.
Salesforce is also expanding its generative AI offerings to capture growing opportunities. The launch of Einstein GPT in March 2023 marked its entry into generative AI, and the subsequent introduction of the AI Cloud service in June 2023 further elevated its AI capabilities. These moves aim to provide comprehensive AI-powered solutions for enterprises seeking to boost productivity.
Strong Partnerships Fuel Growth
Salesforce's growth is significantly bolstered by strategic partnerships with other tech giants, which enhance its market position and technological prowess. Collaborations with companies like International Business Machines (IBM - Free Report) , Amazon’s (AMZN - Free Report) Amazon Web Services (“AWS”) and Alphabet’s (GOOGL - Free Report) Google Cloud have been pivotal.
The partnership with IBM involves integrating IBM’s watsonx AI and Data Platform with Salesforce’s Einstein 1 Platform, showcasing Salesforce’s commitment to leveraging AI for more personalized and efficient customer experiences.
With Amazon's AWS, Salesforce has enhanced its cloud capabilities, offering more robust and scalable solutions for enterprise customers. The alliance with Google Cloud integrates Google's data analytics and AI tools with Salesforce’s CRM, providing powerful insights and more efficient business processes.
These partnerships enable Salesforce to innovate rapidly, expand its service offerings and maintain a competitive edge, driving sustained growth and market leadership.
Trading Above Key Moving Averages
Marvell shares are currently trading above their 50-day and 200-day moving averages, indicating short-term bullish sentiment among investors.
Moving Average
Image Source: Zacks Investment Research
Near-Term Challenges
Salesforce has enjoyed impressive growth in the past, with more than 20% sales growth each quarter until fiscal 2022. However, since fiscal 2023, the company's growth has been slowing, causing some concern. In the first quarter of fiscal 2025, sales growth decelerated to a low-double-digit percentage range.
A significant factor behind this slowdown is the softening of IT spending, as enterprises delay large IT investments due to macroeconomic uncertainties and geopolitical issues.
Additionally, Salesforce is focusing on improving margins and profits through cost-cutting measures, including workforce reductions. While this strategy has boosted its bottom line, it also hurt sales growth due to reduced investments in sales and marketing activities, posing a challenge for Salesforce’s near-term prospects.
The current Zacks Consensus Estimate for fiscal 2025 and 2026 suggests that top-line growth will slow further to a mid-to-high single-digit percentage range.
Image Source: Zacks Investment Research
Final Thoughts
Salesforce’s strong portfolio and commitment to aligning products with customer needs point to solid long-term growth potential. However, several risks could undermine its near-term prospects. The global economic environment remains uncertain, with potential headwinds from inflation, high interest rates and geopolitical tensions. These factors could impact enterprise spending on software and IT services.
Therefore, we believe investors should wait for a better entry point for Salesforce, which currently carries a Zacks Rank #3 (Hold), given the modest growth prospects amid ongoing macroeconomic uncertainties. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Salesforce (CRM) Rises 6% in a Week: What Should Investors Do Now?
Salesforce, Inc. (CRM - Free Report) shares saw an impressive 6.1% increase last week, standing out against the broader Zacks Computer – Software industry, which dipped 1.3%. The stock also outperformed the Zacks Computer and Technology sector and the S&P 500, which fell by 2.7% and 1.1%, respectively. This notable rise has sparked investor interest, prompting many to reconsider their stance on the stock. So, should you buy, hold or sell Salesforce now?
One-Week Price Performance
Image Source: Zacks Investment Research
Strengthening Market Position
Salesforce continues to dominate the customer relationship management (CRM - Free Report) market, going head-to-head with tech giants like Microsoft, Oracle and SAP. Its extensive suite of CRM applications and a robust partner ecosystem give it a significant edge. Gartner consistently ranks Salesforce as a leader in the CRM space, highlighting its strong market presence.
A key part of Salesforce's strategy is its targeted acquisitions that enhance its technological capabilities and market reach. The 2021 acquisition of Slack for $27.7 billion is a prime example of integrating communication and collaboration tools into its CRM platform and driving cross-sell opportunities. In 2023, the acquisitions of startups Spiff and Arikit.ai further strengthened Salesforce's market position.
Salesforce is also expanding its generative AI offerings to capture growing opportunities. The launch of Einstein GPT in March 2023 marked its entry into generative AI, and the subsequent introduction of the AI Cloud service in June 2023 further elevated its AI capabilities. These moves aim to provide comprehensive AI-powered solutions for enterprises seeking to boost productivity.
Strong Partnerships Fuel Growth
Salesforce's growth is significantly bolstered by strategic partnerships with other tech giants, which enhance its market position and technological prowess. Collaborations with companies like International Business Machines (IBM - Free Report) , Amazon’s (AMZN - Free Report) Amazon Web Services (“AWS”) and Alphabet’s (GOOGL - Free Report) Google Cloud have been pivotal.
The partnership with IBM involves integrating IBM’s watsonx AI and Data Platform with Salesforce’s Einstein 1 Platform, showcasing Salesforce’s commitment to leveraging AI for more personalized and efficient customer experiences.
With Amazon's AWS, Salesforce has enhanced its cloud capabilities, offering more robust and scalable solutions for enterprise customers. The alliance with Google Cloud integrates Google's data analytics and AI tools with Salesforce’s CRM, providing powerful insights and more efficient business processes.
These partnerships enable Salesforce to innovate rapidly, expand its service offerings and maintain a competitive edge, driving sustained growth and market leadership.
Trading Above Key Moving Averages
Marvell shares are currently trading above their 50-day and 200-day moving averages, indicating short-term bullish sentiment among investors.
Moving Average
Image Source: Zacks Investment Research
Near-Term Challenges
Salesforce has enjoyed impressive growth in the past, with more than 20% sales growth each quarter until fiscal 2022. However, since fiscal 2023, the company's growth has been slowing, causing some concern. In the first quarter of fiscal 2025, sales growth decelerated to a low-double-digit percentage range.
A significant factor behind this slowdown is the softening of IT spending, as enterprises delay large IT investments due to macroeconomic uncertainties and geopolitical issues.
Additionally, Salesforce is focusing on improving margins and profits through cost-cutting measures, including workforce reductions. While this strategy has boosted its bottom line, it also hurt sales growth due to reduced investments in sales and marketing activities, posing a challenge for Salesforce’s near-term prospects.
The current Zacks Consensus Estimate for fiscal 2025 and 2026 suggests that top-line growth will slow further to a mid-to-high single-digit percentage range.
Image Source: Zacks Investment Research
Final Thoughts
Salesforce’s strong portfolio and commitment to aligning products with customer needs point to solid long-term growth potential. However, several risks could undermine its near-term prospects. The global economic environment remains uncertain, with potential headwinds from inflation, high interest rates and geopolitical tensions. These factors could impact enterprise spending on software and IT services.
Therefore, we believe investors should wait for a better entry point for Salesforce, which currently carries a Zacks Rank #3 (Hold), given the modest growth prospects amid ongoing macroeconomic uncertainties. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.