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Salesforce Stock Price Rally is Sustainable

Salesforce (NYSE: CRM) stock price underperformed compared to its financial growth and future fundamentals. CRM shares rallied only 20% year to date. However, analysts believe the upside momentum in CRM share price is likely to extend into the next year.

The bulls are praising its attractive valuations along with revenue growth and free cash flow generation potential. Salesforce stock price is currently trading slightly below from 52-weeks high of $165.

The company has also added to investors sentiments by raising the revenue and earnings outlook for the full year. Moreover, the company presented a bright outlook for fiscal 2021.

CRM salesforce.com, inc. daily Stock Chart

Analysts Expect Extension of Salesforce Stock Price Momentum

Piper Jaffray analyst Brent Bracelin names Salesforce as his favorite stock. Although the analyst forecasts an intensifying SaaS competition, he anticipates CRM to increase FCF growth above 20% Y/Y in the following two years.

Brent Bracelin has provided a Buy rating with a price target of $190, which represents a significant upside from the current level of $160 a share.

On the other hand, UBS has also set a price target of $190 with a Buy rating. The analyst expects the continuation of upside momentum in the following quarters. The analyst is bullish about attractive valuations and free cash generation potential.

Strong Financials and Robust Outlook Strengthens Sentiments

Salesforce has generated 22% year over year revenue growth in the second quarter. The company expects third-quarter revenue to increase by 31% from the previous year quarter.

Marc Benioff, Chairman & co-CEO said, “With our Customer 360 vision, Einstein AI and the millions of Trailblazers innovating on our platform, Salesforce has never been better positioned for the future.”

The company forecasts sustainable revenue growth in the following years. Salesforce expects this year’s revenue to hit $ $17.00B compared to the previous forecast of $16.75B. For FY21, CRM management believes they are in a position to expand the revenue base to $20.9B. Overall, strong financial growth is likely to enhance the investor’s sentiments.

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.