Why Salesforce Stock Rallied Today
Key Points
Salesforce stock has been battered by AI-related fears.
Analysts' consensus estimates and management's forecast are virtually identical.
The stock is attractively priced.
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Shares of Salesforce (NYSE: CRM) rallied on Tuesday, jumping as much as 4.4%. As of 3:37 p.m. ET, the stock was still up 3.9%.
The customer relationship management (CRM) specialist got a vote of confidence from a Wall Street analyst.
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An AI-driven future
It's no secret that software stocks have been punished in recent months over fears that autonomous AI agents could make them obsolete. As the world's largest software-as-a-service (SaaS) provider, Salesforce has been hit particularly hard.
Citi analyst Tyler Radke maintained a neutral rating on the stock while raising his price target to $204, up from $187, representing 7% upside from Monday's closing price. The analyst made the move ahead of Salesforce's fiscal 2027 second-quarter financial report, which is scheduled for Aug. 26. Radke notes that conditions improved "modestly" compared to Q1. While the landscape remains mixed, the higher price target reflects the better-than-expected channel checks and to match consensus estimates.
For the second quarter, Salesforce's forecast calls for revenue of $11.31 billion, representing about 10.5% growth, and adjusted earnings per share (EPS) of $3.26, both at the midpoint of its guidance. Wall Street's consensus estimates currently call for revenue of $11.32 billion and adjusted EPS of $3.27, in line with management's guidance.
Salesforce has shifted to adapt its business to an AI-powered future, integrating agentic AI tools into its offerings. The company's Agentforce platform helps customers build and deploy autonomous agents in a familiar environment.
It's worth remembering that in Q1, Salesforce delivered record first-quarter revenue that grew 13% year over year to $11.1 billion, driving adjusted EPS up 50% to $3.88. Moreover, the company's current remaining performance obligation (RPO) jumped 14% to $33.6 billion, building a solid foundation for the remainder of the year.
To be clear, challenges remain, but Salesforce has a long track record of adapting to changes in the landscape. And at less than 23 times earnings, the stock is a steal.
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Citigroup is an advertising partner of Motley Fool Money. Danny Vena, CPA 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.
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