Salesforce Up 27% in 2024: Will the Stock Sustain Momentum in 2025?

Salesforce, Inc. CRM closed 2024 on a high note, delivering a robust 27% gain in a turbulent market. This impressive performance outpaced the Zacks Computer – Software industry’s 14.7% growth and the S&P 500’s 24.4% rise.

It has also exceeded other peers in the space, including Microsoft Corporation MSFT, Intuit Inc. INTU and Adobe Inc. ADBE, positioning Salesforce as a standout in its industry. MSFT and INTU shares have risen 12.1% and 0.5%, respectively, while ADBE declined 25.5% in 2024.

2024 Price Return Performance

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With this momentum, investors are left pondering whether CRM will continue its upward momentum in 2025.

Salesforce’s Unmatched Market Leadership

Salesforce’s dominance in customer relationship management remains its strongest pillar. Competing with tech heavyweights like Microsoft, Oracle and SAP, Salesforce consistently holds the crown as the market leader, as recognized by Gartner. This achievement stems from its robust product suite, seamless user experience and a dynamic partner ecosystem.

Strategic acquisitions have fueled this leadership, with notable deals like the $27.7 billion Slack acquisition in 2021 integrating collaborative tools directly into Salesforce’s CRM platform. More recently, the 2024 acquisition of Own Company for $1.9 billion solidified Salesforce’s foothold in data protection and management — critical as companies increasingly prioritize artificial intelligence (AI) and digital transformation.

Salesforce’s aggressive push into generative AI has reshaped its growth trajectory. The introduction of Einstein GPT in March 2023 and the subsequent expansions in the space have enhanced its product portfolio. These tools allow enterprises to leverage AI for streamlined processes and increased productivity, ensuring Salesforce remains a leader in tech innovation.

Salesforce’s Valuation Suggests Upside Potential

Despite its stellar 2024 rally, Salesforce remains attractively valued. With a forward 12-month price-to-earnings (P/E) ratio of 29.84 — below the industry average of 32.02 — the stock offers relative affordability. For investors seeking long-term value in a tech giant, this could present an enticing entry point.

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Challenges Weighing on Salesforce’s Trajectory

While Salesforce’s long-term prospects shine brightly, the company faces significant near-term challenges. Revenue growth has decelerated from its historical double-digit pace to single-digit increases in recent quarters. This slowdown reflects cautious enterprise spending amid economic uncertainty and geopolitical pressures. Analysts anticipate this trend to persist, with mid-to-high single-digit growth expected for fiscal 2025 and 2026.

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The slowdown highlights a shift in enterprise behavior, with businesses favoring smaller, incremental projects over large-scale digital transformations. For Salesforce, this means recalibrating its approach to maintain relevance in a changing IT spending environment.

Conclusion: Hold CRM Stock for Now

Salesforce’s resilience in 2024, bolstered by strong leadership in customer relationship management and innovations in generative AI, makes it a solid long-term investment. However, the near-term challenges of slowing revenue growth and macroeconomic pressures warrant a cautious stance.

For now, holding the stock allows investors to benefit from Salesforce’s sustained innovation and market leadership while avoiding the risks of overvaluation in a volatile environment. Patience is key as Salesforce navigates its current challenges and positions itself for future growth. Salesforce carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Microsoft Corporation (MSFT): Free Stock Analysis Report
 
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