Should You Buy Salesforce Stock Before Feb. 25?

Salesforce (NYSE: CRM) stock was one of the biggest movers on Tuesday Feb. 3, dropping some 8% in mid-afternoon trading. It continues what has been a brutal year for Salesforce, as the stock is already down 27% year to date and 43% over the past 12 months.

The catalyst on Tuesday was not directly specific to Salesforce -- it was caught up in a massive sell-off, as the S&P 500 dropped 0.8% and the Nasdaq Composite fell about 2.4%. This had to do with a combination of factors, including high-tech valuations, a potential partial government shutdown, and investor concerns about artificial intelligence (AI) -- particularly AI software stocks.

The latter factor was what mostly caused the Salesforce sell-off. It stemmed in part from the introduction of a new AI plug-in from Anthropic and its Claude chatbot.

Image source: Getty Images.

Why Salesforce stock has tanked

The plug-in is designed to handle legal queries and commands, like reviewing documents, checking for compliance, and processing clerical work.

It sent many software enterprise software stocks into a tailspin, as investors feared that these types of plug-ins could bypass software-as-a-service type software models, like Salesforce.

The situation with Salesforce is a bit more complicated than that, as it is a partner with Claude, using it for its Agentforce chatbot model. Salesforce said the new bi-directional Claude models, called model context protocols (MCP), will "enable customers to bring critical Salesforce context directly into Claude." In other words, they can "talk" or interact with each other, improving the user experience.

But this only heightens the concern of some investors and analysts that the Claude-based agentic AI will cannibalize the traditional software model, leading to fewer "seats" sold, as the software is sold by the seat.

That's one of the reasons Piper Sandler lowered Salesforce's price target to $280 per share from $315, saying "seat compression" and "vibe coding" could limit its stock price growth. Vibe coding is a newish term for using AI to build software rather than through traditional programming.

Should you buy Salesforce stock ahead of earnings?

Salesforce reports earnings on Feb. 25 after the market closes, so should investors buy ahead of earnings or wait for the results?

On the one hand, it would seem like a fantastic opportunity to buy Salesforce stock, given the nosedive that Salesforce has been in. It is trading at a 52-week low, and its P/E ratio of 28 is as low as it has been since the COVID-19 pandemic.

Also, Salesforce showed signs of turning the corner on its AI investments in Agentforce last quarter. Annual recurring revenue for Agentforce and Data 360 jumped 114% year over year to $1.4 billion, and Agentforce accounts increased 70% quarter over quarter. Further, the remaining performance obligation pipeline increased 11% to $29.4 billion, and the company raised its fiscal 2026 revenue guidance.

Also, last week, Salesforce inked a $5.6 billion contract with the U.S. Army.

These signs point to the potential for a post-earnings bounce for Salesforce. However, I'm a bit concerned that larger market and economic forces, like the potential for a shutdown, geopolitical and policy concerns, and high valuations, could be a drag not only on Salesforce but also on other tech and growth stocks.

Being more cautious, I'd probably take a wait-and-see approach until earnings come out on Feb. 25.

Dave Kovaleski 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.