Software giant has spent the past year on the defensive in a major way. Its shares fell as much as 50% from last year’s highs before recovering and currently trade right around $200, reflecting widespread concerns that artificial intelligence (AI) could disrupt parts of the company’s traditional business model. These concerns are not specific to Salesforce by any measure, but the company has been one of the more visible victims of the shift in sentiment.
Yet Salesforce’s latest earnings report, released on Feb. 25, may have marked a turning point. The firm once again delivered a headline beat on analyst expectations while reporting its highest revenue in history, a reminder that demand for its platform remains strong even as the broader software sector grapples with rapid technological change.
One week after those results, the market appears to be sending a clear signal. Shares have rebounded roughly 15% from their pre-earnings lows and have so far held those gains, suggesting investors may finally be starting to look past the worst-case AI narrative. Let’s jump in and see what else Salesforce has going for it, and what makes the risk/reward profile so attractive right now.
Core Business Remains Strong
For starters, the fundamental case for Salesforce has not changed nearly as much as the stock price would suggest. The company remains the dominant customer relationship management (CRM) platform in the enterprise space, with its tools deeply embedded in the sales, marketing and customer service operations of thousands of large organizations.
While investors have become increasingly concerned that AI could eat into parts of Salesforce’s business by automating many of its key functions, the company’s latest results indicate that demand for its platform remains resilient. Sure, visibility into the company’s growth trajectory might have dimmed a little, but its actual revenue continues to grow, and analyst expectations were exceeded once again.
Another factor that’s important to consider, and that many of the other victims in the so-called “SaaSpocalypse” can’t boast of, is Salesforce’s dominant market position. The company is not some niche software provider but a core operational system for many enterprises, and is considered by many to be a mission-critical platform. Replacing that kind of infrastructure is neither simple nor quick, and AI is poised to displace certain software platforms; there are likely many less entrenched—and therefore easier—targets than Salesforce.
AI Concerns May Be Overdone
The rise of AI has become the dominant narrative across the technology sector in recent months, and in a way, it’s understandable. Investors are right to worry that AI-powered tools could reduce the need for traditional enterprise software platforms or enable new, and much cheaper, competitors to emerge. That concern has weighed heavily on CRM stock and its peers over the past year.
However, as MarketBeat has highlighted, this new dynamic between AI and established enterprise players may ultimately prove more complementary than disruptive. As companies adopt AI more widely, the need to manage customer data, workflows and automated processes could actually increase, making the likes of Salesforce more mission-critical than ever. If that proves to be the case, the current level of skepticism toward the stock could eventually look extremely overdone.
Analysts See Significant Upside
Backing up this thesis is the fact that so many of the analysts on Wall Street are leaning into the risk/reward setup.
In fact, immediately following the company’s latest earnings report, many quickly reiterated bullish ratings on the stock.
Among them were Piper Sandler, Oppenheimer and Needham, all of which maintained Buy or equivalent ratings. The latter’s refreshed price target of $400 is particularly noteworthy, as it targets potential upside of more than 100% from the stock’s current price.
Even for those who do buy into the possibility of AI taking business from traditional SaaS eventually, the timing and risk/reward setup right now is hard to beat.
Price Action Suggests Sentiment May Be Shifting
Perhaps the most important signal, and the one that ties this all together, is the one coming directly from the market itself. After a long period of heavy selling pressure, Salesforce shares have begun to stabilize and show signs of gains.
The stock has climbed roughly 10% from its pre-earnings low and, importantly, has not set a new low since. That shift in price behavior may suggest that the intense selling pressure that defined the past year is starting to fade.
If the stock can continue to consolidate above the $200 level in the weeks ahead, it could form a solid base from which to launch a broader recovery rally. After a 50% decline, this combination of improving price action and continued analyst support may be exactly what Salesforce needs to begin rebuilding investor confidence.
