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CRM to Buy Own: Does Inorganic Growth Plan Make the Stock a Buy?
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Salesforce, Inc. (CRM - Free Report) recently made headlines by announcing its acquisition of Own Company for $1.9 billion. This strategic move further underscores Salesforce’s commitment to expanding its capabilities in data protection and management, critical components as businesses increasingly rely on artificial intelligence (AI) and digital transformation.
This acquisition is part of Salesforce's broader inorganic growth strategy, which has seen the company expand its portfolio through multiple high-profile deals. However, Salesforce’s slowing sales growth poses questions about its near-term prospects — is CRM stock a buy, sell or hold after this acquisition.
Strengthening Salesforce’s Data Security Offering
Salesforce’s acquisition of Own Company brings an immediate enhancement to its data security capabilities. Own, trusted by nearly 7,000 customers for managing mission-critical data, will integrate seamlessly with Salesforce’s existing solutions, such as Salesforce Backup, Shield and Data Mask. This acquisition arrives at a time when enterprises are increasingly focused on protecting their data from security threats, system failures and regulatory risks.
As AI adoption accelerates across industries, Salesforce's ability to offer robust data protection and management solutions will become a key competitive advantage. By integrating Own’s platform into its ecosystem, Salesforce can unlock new ways for businesses to gain insights from historical data, optimize decision-making and foster AI-driven innovation. This positions Salesforce not just as a customer relationship management solution provider but as a leader in secure AI operations, which is essential for enterprises in highly regulated sectors.
In the long term, Salesforce stands to benefit greatly from this acquisition as AI and data-driven solutions become more critical across industries. Own’s platform enhances security while enabling businesses to gain valuable insights from their data, making it indispensable for companies looking to thrive in a digital-first world.
The acquisition also comes at a time when data privacy regulations are becoming stricter, and companies are increasingly vulnerable to cyberattacks. As these concerns rise, Salesforce's ability to offer comprehensive, secure solutions for managing sensitive data will drive demand for its products, ensuring continued growth.
Salesforce’s Aggressive Inorganic Growth Strategy
Salesforce has a long history of growing through acquisitions, and the purchase of Own is another chapter in this strategy. Its aggressive acquisition spree has allowed it to diversify beyond customer relationship management, positioning itself as a comprehensive enterprise software provider.
Some of the most notable acquisitions include the $27.7 billion purchase of Slack in 2021, which expanded Salesforce’s presence in digital collaboration and remote work tools. Similarly, the $6.5 billion acquisition of MuleSoft in 2018 added advanced integration services to Salesforce’s portfolio, enabling businesses to connect various systems and applications more effectively.
These acquisitions, along with smaller deals like Troops.ai and Phennecs, have enabled Salesforce to stay ahead of its competitors by offering a suite of solutions that address the modern enterprise's needs, from AI to digital collaboration and beyond. This acquisition-driven expansion has been crucial in transforming Salesforce into a one-stop shop for enterprise software solutions.
Near-Term Challenges for Salesforce
Despite the long-term potential, Salesforce faces several near-term challenges. One of the most significant issues is slowing sales growth. In its second-quarter fiscal 2025 report, Salesforce posted 8% year-over-year revenue growth to $9.33 billion. While this is a solid number, it’s a notable deceleration from the higher double-digit growth rates seen in previous fiscals.
As economic uncertainty persists, businesses may delay or reduce their investments in software, which could continue to weigh on Salesforce’s growth. The Zacks Consensus Estimate suggests that Salesforce’s revenue growth will remain in the mid-to-high single-digit percentage range for fiscal 2025 and 2026, indicating that the company’s high-growth phase may be behind it.
The deceleration in revenue growth is expected to drag down Salesforce’s earnings growth as well. The company’s earnings per share are now projected to witness a CAGR of just 14.6% over the next five years, a sharp decline from the 42.9% CAGR it achieved in the previous five years.
Image Source: Zacks Investment Research
This slowdown in top-line growth has been weighing on the CRM stock’s price as investors have turned increasingly cautious about its near-term prospects. Salesforce has seen its stock decline nearly 7% year to date, significantly underperforming the broader market. During this period, the S&P 500 and the Zacks Computer and Technology sector posted gains of 13.3% and 12.6%, respectively, making Salesforce's decline all the more concerning.
Even within its own industry, the Zacks Computer – Software, Salesforce lags its key competitors like Oracle Corporation (ORCL - Free Report) , Pegasystems Inc. (PEGA - Free Report) and SAP SE (SAP - Free Report) , whose shares have risen more than 30% in the same period.
YTD Price Return Performance
Image Source: Zacks Investment Research
To add further concerns, CRM shares have fallen below their 50-day and 200-day moving averages — key technical levels that often signal a bearish trend.
Moving Averages Indicates Bearish Trend
Image Source: Zacks Investment Research
Conclusion: Hold Salesforce Stock for Now
Salesforce’s acquisition of Own Company strengthens its long-term position in the AI and data management sectors. This move bolsters its data protection capabilities, which will be increasingly crucial as businesses prioritize data security in the AI-driven world. This Zacks Rank #3 (Hold) company’s history of successful acquisitions, like Slack and MuleSoft, further supports its strategy of growing through inorganic expansion. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
However, near-term challenges, including slowing sales growth and a lofty valuation, suggest that Salesforce stock could experience further volatility. For current investors, holding the stock is a prudent approach as the long-term growth narrative remains strong. For those considering buying into Salesforce, waiting for a more favorable entry point may be a wise strategy, given the short-term risks.
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CRM to Buy Own: Does Inorganic Growth Plan Make the Stock a Buy?
Salesforce, Inc. (CRM - Free Report) recently made headlines by announcing its acquisition of Own Company for $1.9 billion. This strategic move further underscores Salesforce’s commitment to expanding its capabilities in data protection and management, critical components as businesses increasingly rely on artificial intelligence (AI) and digital transformation.
This acquisition is part of Salesforce's broader inorganic growth strategy, which has seen the company expand its portfolio through multiple high-profile deals. However, Salesforce’s slowing sales growth poses questions about its near-term prospects — is CRM stock a buy, sell or hold after this acquisition.
Strengthening Salesforce’s Data Security Offering
Salesforce’s acquisition of Own Company brings an immediate enhancement to its data security capabilities. Own, trusted by nearly 7,000 customers for managing mission-critical data, will integrate seamlessly with Salesforce’s existing solutions, such as Salesforce Backup, Shield and Data Mask. This acquisition arrives at a time when enterprises are increasingly focused on protecting their data from security threats, system failures and regulatory risks.
As AI adoption accelerates across industries, Salesforce's ability to offer robust data protection and management solutions will become a key competitive advantage. By integrating Own’s platform into its ecosystem, Salesforce can unlock new ways for businesses to gain insights from historical data, optimize decision-making and foster AI-driven innovation. This positions Salesforce not just as a customer relationship management solution provider but as a leader in secure AI operations, which is essential for enterprises in highly regulated sectors.
In the long term, Salesforce stands to benefit greatly from this acquisition as AI and data-driven solutions become more critical across industries. Own’s platform enhances security while enabling businesses to gain valuable insights from their data, making it indispensable for companies looking to thrive in a digital-first world.
The acquisition also comes at a time when data privacy regulations are becoming stricter, and companies are increasingly vulnerable to cyberattacks. As these concerns rise, Salesforce's ability to offer comprehensive, secure solutions for managing sensitive data will drive demand for its products, ensuring continued growth.
Salesforce’s Aggressive Inorganic Growth Strategy
Salesforce has a long history of growing through acquisitions, and the purchase of Own is another chapter in this strategy. Its aggressive acquisition spree has allowed it to diversify beyond customer relationship management, positioning itself as a comprehensive enterprise software provider.
Some of the most notable acquisitions include the $27.7 billion purchase of Slack in 2021, which expanded Salesforce’s presence in digital collaboration and remote work tools. Similarly, the $6.5 billion acquisition of MuleSoft in 2018 added advanced integration services to Salesforce’s portfolio, enabling businesses to connect various systems and applications more effectively.
These acquisitions, along with smaller deals like Troops.ai and Phennecs, have enabled Salesforce to stay ahead of its competitors by offering a suite of solutions that address the modern enterprise's needs, from AI to digital collaboration and beyond. This acquisition-driven expansion has been crucial in transforming Salesforce into a one-stop shop for enterprise software solutions.
Near-Term Challenges for Salesforce
Despite the long-term potential, Salesforce faces several near-term challenges. One of the most significant issues is slowing sales growth. In its second-quarter fiscal 2025 report, Salesforce posted 8% year-over-year revenue growth to $9.33 billion. While this is a solid number, it’s a notable deceleration from the higher double-digit growth rates seen in previous fiscals.
As economic uncertainty persists, businesses may delay or reduce their investments in software, which could continue to weigh on Salesforce’s growth. The Zacks Consensus Estimate suggests that Salesforce’s revenue growth will remain in the mid-to-high single-digit percentage range for fiscal 2025 and 2026, indicating that the company’s high-growth phase may be behind it.
The deceleration in revenue growth is expected to drag down Salesforce’s earnings growth as well. The company’s earnings per share are now projected to witness a CAGR of just 14.6% over the next five years, a sharp decline from the 42.9% CAGR it achieved in the previous five years.
Image Source: Zacks Investment Research
This slowdown in top-line growth has been weighing on the CRM stock’s price as investors have turned increasingly cautious about its near-term prospects. Salesforce has seen its stock decline nearly 7% year to date, significantly underperforming the broader market. During this period, the S&P 500 and the Zacks Computer and Technology sector posted gains of 13.3% and 12.6%, respectively, making Salesforce's decline all the more concerning.
Even within its own industry, the Zacks Computer – Software, Salesforce lags its key competitors like Oracle Corporation (ORCL - Free Report) , Pegasystems Inc. (PEGA - Free Report) and SAP SE (SAP - Free Report) , whose shares have risen more than 30% in the same period.
YTD Price Return Performance
Image Source: Zacks Investment Research
To add further concerns, CRM shares have fallen below their 50-day and 200-day moving averages — key technical levels that often signal a bearish trend.
Moving Averages Indicates Bearish Trend
Image Source: Zacks Investment Research
Conclusion: Hold Salesforce Stock for Now
Salesforce’s acquisition of Own Company strengthens its long-term position in the AI and data management sectors. This move bolsters its data protection capabilities, which will be increasingly crucial as businesses prioritize data security in the AI-driven world. This Zacks Rank #3 (Hold) company’s history of successful acquisitions, like Slack and MuleSoft, further supports its strategy of growing through inorganic expansion. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
However, near-term challenges, including slowing sales growth and a lofty valuation, suggest that Salesforce stock could experience further volatility. For current investors, holding the stock is a prudent approach as the long-term growth narrative remains strong. For those considering buying into Salesforce, waiting for a more favorable entry point may be a wise strategy, given the short-term risks.