Rising concerns: The Salesforce headquarters in San Francisco, California. As a sign of Wall Street’s wait-and-see approach, consensus estimates for the company’s earnings and revenue next year haven’t budged in 12 months. — Bloomberg
SAN FRANCISCO: Salesforce Inc shares have never been cheaper, but investors still aren’t buying amid rising fears about artificial intelligence (AI) eroding the company’s growth prospects.
The maker of customer relationship management software has recently pointed to better times ahead, forecasting double-digit revenue growth in the coming years.
However, Wall Street isn’t optimistic that the results will do much to alter the cautious narrative surrounding the stock.
“We need a change in sentiment for investors to take a look, and that will be driven by stability and an improvement in topline growth,” said ClearBridge Investments senior research analyst Hilary Frisch.
Salesforce’s stock price has been hammered by pessimism all year, plunging nearly 30% in 2025 to make the company the second-worst performer in the Dow Jones Industrial Average and putting it among the 25 worst in the S&P 500 Index.
Meanwhile, shares of software companies that are perceived AI winners like Microsoft Corp, Oracle Corp and Palantir Technologies Inc are thriving.
The sell-off has taken the company’s market valuation to the lowest it has been since Salesforce went public in 2004.
The stock currently trades at 19 times estimated earnings over the next 12 months, far below its 10-year average of 47 and less than the S&P 500’s multiple of roughly 22. Shares rose 1.3% on Wednesday.
“If its forecast is true, then the valuation isn’t fair and likely represents an attractive opportunity for long-term investors,” Frisch said.
“While I think we’ll get that stability and improvement over the coming 12 to 18 months, I don’t know that this report will be the catalyst for the story changing, as concerns over AI disruption remain very present.”
While Salesforce’s forecast eased concerns about an imminent slowdown, it didn’t address Wall Street’s primary concern: That offerings from AI-native companies like OpenAI will reduce demand for its services and pricing power.
Salesforce does have AI products of its own, notably Agentforce, which automates some workloads.
But investors aren’t expecting to see much of a financial contribution from them yet, which keeps the company’s perceived ability to thrive in the AI era in doubt.
As a sign of Wall Street’s wait-and-see approach, consensus estimates for the company’s earnings and revenue next year haven’t budged in 12 months.
“Though there is ample pipeline interest in Agentforce/Data Cloud, Agentforce production remains limited,” Citi analyst Tyler Radke wrote in a note to clients on Nov 26.
“We await wider rollouts and evidence of commercialisation before considering turning more constructive.”
The company isn’t alone in feeling the heat. Software-as-a-service (SaaS) stocks have been broadly pressured this year on concerns over AI disruption, with a Morgan Stanley basket tracking the group down 12% in 2025.
In many ways the market is getting ahead of itself, as the damage from AI has yet to show up in earnings reports.
Salesforce is expected to show net income growth of 11% this fiscal year on an 8.8% gain in revenue.
And both are expected to accelerate in each of the firm’s next three fiscal years, with net income rising 20% by fiscal 2029 on the back of an 11% jump in revenue.
With that in mind, some Wall Street pros think the concerns are misplaced.
The SaaS group is trading at a 30% to 40% discount to its fundamentals, according to a research note from KeyBanc Capital Markets analyst Jackson Ader on Nov 24.
The valuations “imply growth falls off a cliff,” even though the worst-case scenario is “unlikely” and “we believe we’ll be pleasantly surprised,” Ader wrote.
He may have a point. The average analyst price target for Salesforce over the next 12 months is around US$325, which implies an almost 40% gain from its US$235 price now and puts it among the top 10 components of the S&P 500 Information Technology Index by that measure.
“Sentiment toward SaaS companies has gotten pretty draconian, but there are some companies that are mission critical, and others where it wouldn’t shut your business down if you replaced them with AI,” said Brad Conger, who oversees US$25bil as chief investment officer at Hirtle Callaghan.
“Salesforce is closer to the mission-critical side of things, and it is one of the companies I think investors should be looking at, but there are no absolutes right now,” he added.
“It remains a very mixed field, and it will take a while for companies to prove that they’ve defended themselves against AI – or that they can be winners.” — Bloomberg
