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IT Updates Are a Tailwind for Salesforce

Shares of this wide-moat tech firm look modestly undervalued.

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Billy Fitzsimmons: We recently attended Dreamforce, Salesforce.com's annual expo in downtown San Francisco, which doubles as the company's financial analyst day. The overarching theme was very clear, as enterprises invest in updating their IT infrastructure, it will serve as a secular tailwind for Salesforce's software-as-a-service and platform-as-a-service solutions. 

We think this is substantiated by research from Gartner, which projects CRM growth at a double-digit compound annual growth rate over the next five years. While Salesforce has nearly 150,000 customers, only 38% are multicloud or use more than one of Salesforce's offerings, but multicloud customers account for more than 92% of revenue, which implies that Salesforce can gain significant revenue upside from the 62% of customers that are not multicloud at this time. Overall, we continue to see Salesforce shares as modestly undervalued.

William Fitzsimmons does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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