On Monday, Piper Sandler showed increased confidence in salesforce.com (NYSE:CRM) by raising its price target to $395 from $325 while maintaining an Overweight rating on the stock. With a current market capitalization of $317.8 billion and trading near its 52-week high of $348.86, InvestingPro analysis indicates the stock is slightly undervalued.
The firm's analyst cited the year 2026 as a pivotal period for the company as it focuses on introducing AI agents to a broader enterprise audience through new offerings such as Agentforce, Foundations, and Data Cloud. These initiatives are expected to set the stage for a stronger performance in fiscal year 2027.
Salesforce (NYSE:CRM)'s fourth-quarter cRPO (calculated remaining performance obligation) growth guidance is anticipated to be around 8%, which poses a slight downside risk to the consensus revenue estimate of $41.3 billion for fiscal 2026, representing a 9% growth. Building on its current revenue base of $36.47 billion and impressive 76.35% gross profit margins, Piper Sandler's estimates are slightly more conservative, predicting a growth of 8.4% leading to revenues of $41.0 billion.
Despite this, the analyst expressed a positive outlook towards the company's free cash flow, which could surpass $13.6 billion, suggesting a potential for consistent double-digit growth in free cash flow annually, building upon its current strong free cash flow of $11.46 billion.
The analyst noted that investor sentiment towards salesforce.com has improved significantly, with the stock price increasing by 30% over the past three months, outperforming the S&P 500's 7% gain. Piper Sandler recommends adding to positions in Salesforce if there are any market pullbacks, based on the company's projected free cash flow power of over $20 per share by the end of calendar year 2028.
The upward revision of the price target to $395 reflects an adjustment for higher projected free cash flow margin expansion to 38.6% in calendar year 2029, up from the previous estimate of 37.0%. This is based on a targeted EV/FCF multiple of 24 times, an increase from the prior multiple of 23 times.
Piper Sandler's outlook suggests a robust financial future for salesforce.com, underpinned by strategic product developments and a strong free cash flow trajectory. For a comprehensive analysis of Salesforce's valuation and growth prospects, investors can access the detailed Pro Research Report available on InvestingPro, which covers over 1,400 top US stocks.
In other recent news, Salesforce has reported impressive second-quarter earnings, with earnings per share of $2.56, an 8% increase in sales, and a 9% rise in subscription and support revenues. The company also made significant acquisitions of Zoomin and Own Company for $1.9 billion in cash and announced plans to hire 1,000 new employees to support Agentforce sales.
Several analysts, including Morgan Stanley (NYSE:MS), Truist Securities, and Deutsche Bank (ETR:DBKGn), have maintained a Buy rating on Salesforce, citing confidence in the company's growth prospects, particularly with its Agentforce platform. However, TD (TSX:TD) Cowen and Erste Group downgraded the stock to Hold, suggesting a more cautious outlook. Salesforce has also introduced a suite of AI agent testing tools, including the Agentforce Testing Center, Sandboxes for Agentforce and Data Cloud, and monitoring tools for Agentforce.
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