Salesforce Could Be Undervalued if This Acquisition Solves Its Biggest Growth Problem

It's been a tough year for Salesforce (NYSE: CRM), with the stock down nearly 40% year to date. The stock has been caught in the software-as-a-service (SaaS) sell-off, and investors worry about its position in an artificial intelligence (AI) world as its overall revenue growth has been stuck in a tight range.

The stock recently got more cold water poured on it when KeyBanc downgraded the stock from "overweight" to "sector weight," with analyst Jackson Ader saying that its agentic AI platform, Agentforce, hasn't been growing as expected. The analyst said the biggest issues appear to be that its customers' data is a mess and that the product isn't yet good enough. He added that in its surveys, CIOs expected to deprioritize Salesforce within their IT budgets in the coming year.

Now Salesforce is trying to fix these issues. First, it introduced Data 360, which employs zero-copy technology to extract data from a variety of sources, both within an organization and also from cloud providers and data warehouses, without dealing with the costs and time of transferring it. It also acquired master data management company Informatica to clean up and organize this data to make it more useful for agentic AI and to serve as a foundation for Agentforce.

More recently, the company has agreed to acquire Fin for $3.6 billion. Fin's main solution is a customer service AI agent, powered by its proprietary Apex AI model, that can help resolve complex customer issues across various channels. As a customer relationship management (CRM) solutions company, first and foremost, improving its offering in this area is a huge priority for the company. The deal is expected to close in Salesforce's fiscal Q4, which ends January 2027.

Image source: The Motley Fool.

Is the stock a buy?

The downturn in Salesforce stock has driven its valuation down to a pretty inexpensive level. It now trades at a forward price-to-sales (P/S) ratio of under 3 based on fiscal 2027 analyst estimates and a forward price-to-earnings (P/E) ratio of 11.5 times. Meanwhile, the company has consistently grown its revenue in the low double-digit range.

In a vacuum, this looks like a pretty attractive entry point; however, Salesforce will need to show accelerating revenue growth for the stock to really rebound from here. It hopes its prior acquisition of Informatica lays the foundation to clean up its customers' data to make it usable for AI agents, and that its pending acquisition of Fin gives it a better front end. If these acquisitions can solve these issues and help accelerate its revenue growth, then the stock looks like an undervalued bargain.

Geoffrey Seiler has positions in Salesforce. The Motley Fool has positions in and recommends Salesforce. The Motley Fool has a disclosure policy.