Salesforce (CRM) is back in the spotlight after a busy run of AI product news, highlighted by its Agentforce powered fan companion agent for Formula 1 and its new telecom-focused Agentforce for Communications suite.

Those Agentforce launches and new partnerships come after a volatile stretch for Salesforce’s stock, with a 7 day share price return of 3.76% and a 30 day share price return of 5.62% partly offsetting a 90 day share price decline of 22.12% and a year to date share price decline of 20.31%. Longer term total shareholder returns of 18.12% over three years contrast with a 28.09% total shareholder return loss over the past year, pointing to momentum that has recently cooled and may be reassessed as investors weigh AI driven growth against concerns about slower core software trends and competition.

If AI platforms like Agentforce are on your radar, this is a good moment to see how peers stack up with our screener of 59 profitable AI stocks that aren't just burning cash for potential ideas beyond Salesforce.

With Salesforce trading at $202.11, alongside a roughly 42% estimated intrinsic discount and about 37% below the average analyst target, is the recent selloff mispricing its AI push, or is the market already fully accounting for future growth?

Most Popular Narrative: 9.8% Undervalued

With Salesforce last closing at $202.11 and the most followed narrative pointing to a fair value of $223.99, the gap between price and expectations is not huge but it is clear enough that the underlying thesis matters.

Looking at the company’s Q3 report, FCF margin is 30%, amounting to $1.8B. If we apply the margin on the FY’25 guide of $38B, we get implied FCF of $11.4B, an outstanding value, and one that is presented as sufficient to justify a $300B market value. However, if we build in the annualized expectation of acquisitions, we may want to include a $2 to $2.5B annual acquisition expense. This brings the FCF value down to about $9B.

Free cash flow is the focus of this narrative. The fair value depends on how much spending on AI, acquisitions and shareholder returns still leaves in the pot. Curious how those moving parts shape that $223.99 figure and the earnings power that has been projected from it?

Result: Fair Value of $223.99 (UNDERVALUED)

However, this hinges on CRM defending its enterprise moat. Weaker AI monetization or heavier acquisition spend could leave that 9.8% upside looking optimistic.

Next Steps

If the mixed signals here leave you undecided, this is a good time to review the numbers yourself and weigh the potential rewards. To see what stands out in the current data, take a closer look at the 4 key rewards.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.