CRM

Salesforce, Inc.

Ticker
CRM
Company
Salesforce, Inc.
Published
2026-08-03
Stance
Long
Price at publication
$190.99
Horizon
3-6 months
Conviction
High
Status
Open
Thesis
Salesforce's pivot to AI-integrated SaaS and continued fundamental growth undermines priced-in concerns over extreme business decline.

Strong fundamental growth and adoption of AI-integrated AgentForce delegitimize concerns of Salesforce-specific IT dereliction, the central impetus behind the stock’s approximate 50% decline from all-time highs, a compelling divergence from the security’s intrinsic value that is worth exploiting. In CRM’s Q1 earnings, reported May 27th, Salesforce crushed analyst EPS estimates, recording a figure of $3.88 vs. an analyst consensus of ~$3.13; shocked with a ~13.27% YOY growth in revenue at $11.13 billion; and maintained a solid gross margin of 77%, as well as a highly efficient non-GAAP operating margin of 34.8% for the enterprise cloud computing industry. Organic growth, however, only rose to 8.5%, exclusionary of the Informatica acquisition, and M&M and buybacks hide this single-digit figure. This specific digit superficially marks a concerning decline in growth, whilst shadily obscuring the accounting; however, while enterprises are seeking in-house, cheaper, AI-powered alternatives to traditional services Salesforce has offered, Salesforce has tactically dodged this integral threat to the typical SaaS business model in two ways:

  1. Salesforce has pivoted into the AI space through AgentForce, integrating into their company the threat itself. Enterprises, presented with AgentForce embedded into existing data workflows, can no longer justify quitting Salesforce on technical premises.

  2. Large businesses cannot easily migrate core historical data and compliance workflows, and doing so (along with maintaining the new system) would be impossibly expensive. Salesforce has a unique moat that no one enterprise can effectively recreate. There is no point in incredible spending and resource reallocation if the potential outcome is only on par with Salesforce’s cheaper and already integrated technology.

So although organic growth has slowed, it likely reflects less the direct implication and more a period of transition to new revenue streams. I’ve established Salesforce as a seemingly strong, efficiently-managed business, priced for its industry’s previously exposed model, and so, to make a strong argument for undervaluation, it becomes crucial that we watch statistics related to this new model, to the adoption and execution of new AI products such as AgentForce. In the upcoming Q2 earnings report on August 26th, this argument will hold if organic growth exceeds 8% (does not decline), AgentForce’s ARR surpasses $2 billion (a firm, proportional increase to the $1 billion figure in Q1), and that cRPO YOY increase remains around or exceeds 15%. Should all of these metrics hit in Q2, Salesforce’s pivot becomes extremely convincing and a massive correction will likely take place, especially backed by an extraordinary base DCF upside of 51% using a discount rate of 8.7% and a terminal value of $190 billion (calculated using P/S as opposed to P/E). However, if enterprises cut seats faster than AgentForce can expand to fund hyper-scaling, revenue will die and the bearish thesis will have been correct, though this is unlikely. Fundamentally, the bull case for CRM bets on the highly-probable successful transition towards AI through AgentForce, and its underlying structural moat as a deeply integrated CRM.