Investing.com -- Needham & Company has identified Salesforce (NYSE:CRM) as their top pick for 2025 within the Enterprise Software (ETR:SOWGn) sector, adding it to their Conviction List.
In a note Wednesday, the firm’s analysts raised the price target for Salesforce from $375 to $400, driven by optimism surrounding the company's innovative Agentforce (AF) strategy.
"CRM is our 2025 top pick in our Enterprise Software universe," Needham states, underscoring their confidence in Salesforce’s ability to execute and monetize this new initiative.
The firm highlights several key findings from recent checks within the Salesforce ecosystem, noting that Agentforce is now a critical component in nearly half of enterprise customer deals.
"AF is an active component in nearly half of enterprise customer-sized deals," Needham writes.
While initial deal sizes are said to be small, the firm anticipates a significant ramp-up in the second half of the year if the pilot projects prove successful.
The focus on artificial intelligence is seen as a pivotal aspect of Salesforce’s strategy, with rapid hiring of AI-focused sales representatives expected to bolster second-half bookings.
"AI-focused sales rep hiring is moving fast, which should aid 2H bookings," Needham adds, signaling that the company is well-positioned to capitalize on AI-driven opportunities.
Needham also highlights the "halo effect" of Agentforce, which is becoming increasingly tangible. Products like Mulesoft are expected to benefit significantly from the broader adoption of Agentforce. "Halo effect is becoming real, Mulesoft likely benefits more than other CRM products," the note adds.
From a valuation perspective, Needham believes Salesforce remains attractive. The company trades at 24x FY26 free cash flow estimates, with Needham projecting 20% FCF growth in FY26. "CRM shares currently trade at 24x FY26 consensus FCF estimates of $13.3B, representing 13.5% y/y FCF growth," Needham states, reinforcing their bullish outlook.