On Tuesday, Erste Group showed a positive shift in perspective on Salesforce.com Inc. (NYSE: NYSE:CRM), upgrading the stock's rating from Hold to Buy. The decision comes as the analyst firm recognizes Salesforce's robust position in customer service, marketing automation, and particularly in the field of data analysis powered by artificial intelligence (AI).
The analyst from Erste Group has cited Salesforce's capacity for consistent revenue growth and operating margin expansion as key factors for the upgrade. The firm anticipates that Salesforce will experience a double-digit percentage increase in earnings per share in the fiscal years 2025 and 2026.
Salesforce's current valuation, according to Erste Group, is moderately lower than the sector average when assessed on a price-to-earnings (P/E) ratio basis. This valuation, paired with the company's growth prospects, appears to have contributed to the analyst's optimistic outlook on the stock.
The upgrade reflects confidence in Salesforce's strategic positioning within its industry, suggesting a favorable forecast for the company's financial performance in the coming years. With a focus on AI and data analysis, Salesforce is expected to harness these technologies to bolster its market presence and financial metrics.
Investors and market watchers may take note of Erste Group's revised rating as it signals potential for Salesforce's stock performance. The upgrade is based solely on the firm's analysis of Salesforce's market position, financial projections, and relative stock valuation.
In other recent news, Salesforce.com Inc. reported robust 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 acquired Zoomin and Own Company for $1.9 billion in cash. BMO Capital Markets, Loop Capital, Piper Sandler, and Oppenheimer have all raised their price targets for Salesforce, reflecting confidence in the company's future performance, particularly in light of the positive reception of its new product, Agentforce.
However, Erste Group and TD Cowen have downgraded the stock to Hold due to projected slower growth. Salesforce plans to hire 1,000 new employees to support Agentforce sales, indicating a stable business capable of expanding its workforce. Investment firm Starboard Value LP identified Salesforce as a potential value creation opportunity at the 2024 Active-Passive Investor Summit.
Further, hedge fund D.E. Shaw backed Mantle Ridge's campaign for changes at Air Products and Chemicals (NYSE:APD), Inc., highlighting Salesforce's ongoing efforts in the industry. These are recent developments that emphasize the company's growth and diversification strategies, including the increased adoption of Agentforce and the expansion of Data Cloud.
InvestingPro Insights
Erste Group's upgrade of Salesforce.com Inc. (NYSE: CRM) to a Buy rating is further supported by recent data and insights from InvestingPro. The company's financial metrics align with the analyst's positive outlook, particularly in terms of growth and profitability.
InvestingPro data shows that Salesforce boasts impressive gross profit margins, with a current gross profit margin of 76.35% for the last twelve months as of Q2 2025. This high margin supports Erste Group's view on the company's potential for operating margin expansion.
Additionally, Salesforce's revenue growth remains solid, with a 10.26% increase over the last twelve months, reinforcing the analyst's expectation of consistent revenue growth. The company's adjusted operating income margin of 19.06% for the same period indicates efficient operations, which could contribute to the projected earnings per share growth.
InvestingPro Tips highlight that Salesforce is trading at a low P/E ratio relative to its near-term earnings growth, with a PEG ratio of 0.21. This metric supports Erste Group's assessment that the stock's valuation is moderately lower than the sector average, potentially offering an attractive entry point for investors.
For readers interested in a more comprehensive analysis, InvestingPro offers 13 additional tips for Salesforce, providing a deeper understanding of the company's market position and financial health.
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