Salesforce Stock Continues to Struggle to Gain Traction. Is It Time to Fish for the Stock or Cut Bait?

Despite its agentic AI solution Agentforce reporting strong momentum, Salesforce (NYSE: CRM) shares once again failed to gain any traction after the company released its fiscal Q1 earnings last Wednesday after the bell. The company's stock has been pummeled this year, down more than 30%, amid the software-as-a-service (SaaS) sell-off.

Let's take a closer look at its results and prospects to see if it's time to fish for some shares or cut bait.

Image source: The Motley Fool.

Agentforce shines

Agentforce was once again a bright spot for Salesforce in Q1, with the artificial intelligence (AI) agent platform seeing its annual recurring revenue (ARR) skyrocket 205% year over year to $1.2 billion. That was generally much higher than most analysts' estimates. Agentforce and Data 360 ARR, excluding Informatica Cloud, meanwhile, doubled.

Overall, Salesforce's revenue increased by 13% year over year to $11.13 billion, which was above its guidance range of $11.03 billion to $11.08 billion and above the $11.05 billion consensus, as compiled by LSEG. Adjusted earnings per share (EPS) jumped 37% to $3.88, which easily topped the $3.12 consensus.

Subscription and support revenue increased by 14%, or 12% in constant currencies, to $10.6 billion. Agentforce 360 Platform and Slack led the way with 43% growth. Agentforce sales, meanwhile, rose 10%, while service sales increased 5%. Marketing and commerce growth was its weakest area, with revenue falling 2%.

Looking ahead, the company guided fiscal Q2 revenue of $11.27 billion to $11.35 billion, representing 10% to 11% growth. It projected adjusted EPS to be between $3.25 and $3.27.

For the full year, it nudged up the low end of its revenue guidance to $45.9 billion to $46.2 billion, up from a prior outlook of $45.8 billion to $46.2 billion, which equates to 11% growth. It expects adjusted EPS of $14.06 to $14.12, a big jump from its earlier forecast of $13.11 to $13.19. Analysts were looking for full-year adjusted EPS of $13.22 on revenue of $46.12 billion.

The company also announced it was launching a $25 billion accelerated buyback plan, which helps explain the big bump in EPS guidance.

Can Salesforce stock rally?

Salesforce has positioned itself well for agentic AI following the introduction of Data 360 and its acquisition of Informatica, which effectively makes its platform an ideal master record for AI agents. Agentforce is growing quickly and beginning to scale, though it still accounts for only a small percentage of its overall revenue. However, given Salesforce's large customer base, it still has a long growth runway.

With the stock trading at a forward price-to-sales (P/S) ratio of 3.5 and a forward price-to-earnings (P/E) ratio of 13 based on current-year analyst estimates, the stock is too cheap in my view, given its opportunity with agentic AI. As such, I'd continue to grab a rod and reel and fish for shares down at these levels.

Geoffrey Seiler has positions in Salesforce. The Motley Fool has positions in and recommends Salesforce. The Motley Fool recommends London Stock Exchange Group Plc. The Motley Fool has a disclosure policy.