On Thursday, Piper Sandler confirmed its positive stance on shares of Salesforce.com (NYSE: CRM), maintaining an Overweight rating and a $325.00 price target for the stock. The firm highlighted Salesforce as a large-cap stock with significant potential for margin expansion and free cash flow growth.
Despite skepticism from growth investors regarding technology disruption and pricing model changes, the firm suggests that value and growth+income investors are showing interest due to the company's potential to increase free cash flow to more than $20 per share.
Salesforce has been identified by Piper Sandler as a "laggard to leader" stock, implying that while it may have underperformed previously, it is poised for a turnaround. The firm's recommendation comes after an upgrade to Overweight last month, a move that was met with some resistance from the investment community.
Concerns raised by investors include potential disruptions from AI technology, shifts in the seat-based pricing model, and uncertainties about margin growth in the event of significant mergers and acquisitions.
Despite these concerns, Piper Sandler emphasizes Salesforce's ongoing journey through the "middle innings" of a multi-year margin expansion narrative. The firm projects that the company could achieve over 40% operating margins, which could, in turn, double its free cash flow to between $20 and $25 per share. This projection is based on the assumption that Salesforce's top-line growth may remain moderate.
The analyst's commentary points to Salesforce's ability to generate over $20 in free cash flow per share as a key factor that could attract investors, particularly those interested in value and growth with income. This financial metric is seen as a strong indicator of the company's underlying financial health and its capacity to generate cash from its operations.
Investors are encouraged to reconsider their positions on Salesforce, as Piper Sandler suggests that the company's financial prospects are solid, despite the current debate among investors about the future of the company's growth and profitability. The firm's reiterated Overweight rating and price target reflect confidence in Salesforce's financial strategy and its potential for long-term success.
In other recent news, Salesforce.com Inc (NYSE:CRM) reported robust second-quarter earnings, with earnings per share of $2.56, an 8% increase in sales, and a 9% rise in subscription and support revenues. The company also acquired Zoomin, a firm specializing in unstructured data management, and Own Company, a provider of data protection and management solutions, for $1.9 billion in cash.
Analyst firms have provided varying perspectives on Salesforce's recent activities. Wolfe Research adjusted its outlook on Salesforce, raising the price target to $320 and maintaining an Outperform rating. Wedbush also maintained a positive outlook on Salesforce, raising the stock's price target to $325.
However, Erste Group and TD Cowen downgraded the stock to Hold due to projected slower growth. Salesforce has launched Agentforce, an AI-driven suite of autonomous bots, and reported a 130% year-over-year growth in its paid customer base.
The company also formed a partnership with IBM (NYSE:IBM) to integrate advanced AI capabilities into its platform. These are among the recent developments in Salesforce's ongoing efforts to remain at the forefront of the customer relationship management industry.
InvestingPro Insights
Piper Sandler's optimistic outlook on Salesforce is further supported by recent data from InvestingPro. The company's market capitalization stands at an impressive $275.25 billion, underscoring its significant presence in the software industry. Salesforce's revenue for the last twelve months as of Q2 2025 reached $36.47 billion, with a solid revenue growth of 10.26% over the same period.
One of the key InvestingPro Tips highlights Salesforce's impressive gross profit margins, which aligns with Piper Sandler's projection of potential margin expansion. The data shows a gross profit margin of 76.35% for the last twelve months as of Q2 2025, demonstrating the company's ability to maintain profitability while scaling its operations.
Another InvestingPro Tip indicates that Salesforce is trading at a low P/E ratio relative to its near-term earnings growth. This is reflected in the company's PEG ratio of 0.19, suggesting that the stock may be undervalued considering its growth prospects. This metric supports Piper Sandler's view of Salesforce as a potential "laggard to leader" stock.
For investors seeking more comprehensive analysis, InvestingPro offers 13 additional tips on Salesforce, providing a deeper understanding of the company's financial health and market position.
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