Salesforce Is Still Undervalued Despite a 28% Gain Over the Past Month
Key Points
Salesforce is using agentic AI to attract new customers and offer something new to existing customers.
CEO Marc Benioff said AI agents are the company's "biggest growth opportunity," a view that runs counter to the central thesis that drove the SaaSpocalypse narrative.
A low valuation and strengthening fundamentals bode well for the stock.
Salesforce (NYSE: CRM) stock is enjoying a resurgence. It's up by 28% over the past month as "SaaSpocalypse" fears subside and agentic artificial intelligence initiatives catapult the company's revenue higher.
However, even after its big rally, Salesforce remains attractively valued. Here's how the SaaS stock could climb further.
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A low valuation collides with accelerating revenue growth
Salesforce now trades at a price-to-earnings (P/E) ratio of 24, which is lower than the average ratio of the S&P 500. Less than a year ago, the customer relationship management platform company commanded a P/E ratio above 40.
It isn't often that a stock's valuation drops as the company's fundamentals improve, but that has been the case with Salesforce. In its fiscal 2027 first quarter, which ended April 30, it delivered 13% year-over-year revenue growth, and CEO Marc Benioff cited agentic AI as "the biggest growth opportunity for our customers, and for Salesforce."
This commentary shatters the idea that the growing use of AI will make Salesforce and similar software platforms obsolete. In fact, AI is helping Salesforce gain market share, serve more customers, and retain its existing customers. Salesforce stock recently climbed above its pre-SaaSpocalypse levels. Its business has strengthened since the correction took shape, which suggests the stock still has more room to run.
High revenue visibility and agentic AI growth reveal future tailwinds
Salesforce operates on an annual recurring revenue model. That makes its future growth predictable as long as customers continue to pay for their monthly subscriptions and upgrade their plans as their needs change. At last report, the company was sitting on $33.6 billion in current remaining performance obligations, which was a 14% year-over-year increase.
Its AgentForce offering is less than two years old and recently crossed $1 billion in annual recurring revenue. This segment, combined with Data 360, reached $3.4 billion in annual recurring revenue, representing year-over-year growth of more than 200%.
The company isn't just seeing high adoption of its agentic AI platform, but also tremendous activity. Salesforce has processed more than 28.6 trillion tokens to date, and that figure was up 152% sequentially in its Q1. Higher token activity suggests Salesforce's AI agent platform will continue to gain momentum. Grand View Research projects a 37.6% compound annual growth rate for enterprise AI through 2030, which could lift Salesforce's results further.
Salesforce will release its fiscal 2027 second-quarter numbers later in August, and management has guided for 10% to 11% year-over-year revenue growth.
These growth rates are respectable, especially considering Salesforce's historically low valuation. The company also saw a 37% year-over-year increase in net income in its fiscal 2027 first quarter, demonstrating that it can boost profit margins while elevating the top line.
Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Salesforce. The Motley Fool has a disclosure policy.