Stephen Lam
Salesforce (NYSE:CRM) has been in the public eye for a long time, but only recently has it popped into the windows of value investors, as its stock was chronically overvalued. CRM stock is now trading at close to half of its 52-week high, losing well over $100 billion in equity market cap over the past 12 months. In this article, I highlight why the stock remains unattractive despite the big decline, so let’s get started.
Why Salesforce?
Salesforce’s flagship product, Sales Cloud, has been helping businesses of all sizes to manage their customers better for many years. It offers powerful features that enable users to track customer interactions and insights, create targeted campaigns, and close deals faster.
Along with its CRM offering, Salesforce also provides an array of cloud-based services for enterprise apps such as marketing automation, analytics, customer service, and ecommerce. By leveraging these services, businesses can improve their operations and better serve their customers. Salesforce has also developed a suite of mobile apps that enable users to access their data on the go. This makes it easier for businesses to stay connected with their customers wherever they may be.
Salesforce holds a strong edge in the CRM space, as its brand recognition and customer base is unparalleled. This is reflected by industry analyst IDC recently ranking Salesforce number one in CRM for the ninth year in a row. This makes Salesforce a virtual “cash minting machine”, as its positioning enables it to charge premium prices for its services, giving way to strong margins. As shown below, Salesforce scores an A+ grade for profitability, with sector leading gross and FCF margins of 73% and 32%, respectively.
Recent Results
Salesforce continues to demonstrate growth, with revenue rising by 14% YoY to $7.8 billion during its fiscal third quarter (ended Nov. 30). Like most U.S. multinational companies, a stronger U.S. dollar…
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