Investors Need a Strong Stomach for This Cheap Software Stock Pick

On the June 29, 2026, episode of The Morning Filter podcast, hosts Susan Dziubinski and Morningstar Chief US Market Strategist Dave Sekera discuss why Salesforce CRM is a pick today. Here’s an excerpt from the episode.

Why Salesforce Stock Is a Top Pick Today

Susan Dziubinski: Your next stock to buy requires a good stomach there, Dave. It’s Salesforce CRM. Run through some of the key numbers on this one.

David Sekera: It’s hard to talk about this one because, admittedly, we’ve been long and wrong about this one for quite a while, but for our tech team, it’s still one of their best ideas. As far as the software sector goes, it’s still the one I think that they have the most confidence in their long-term outlook and how this company is going to work out over time, and utilize artificial intelligence, and how that’s going to change their business model, and they’re going to change with it. At this point: 5-star-rated stock, trades at over 40% discount to fair value, High Uncertainty, narrow economic moat. Again, probably the poster child of starting with a relatively small position and having that dry powder just to be able to dollar-cost average into it on the way down. At the same point, the stock has had a couple of instances where you’ve gotten a pretty decent pop, where if you did dollar-cost average down, you’ve had some instances to be able to take some profit along the way as well. Again, with as much as this one has dropped just over the past month, you’re kind of getting that opportunity to try and buy some stock here on the cheap.

Dziubinski: Salesforce really has gone through the wringer along, of course, with other software stocks, due to those concerns around AI disruption. Delve a little bit more into why this remains a top pick for our analysts and for you.

Sekera: So, very poor performance month to date, down at 17%. It’s down 56% overall from its December 2024 high. With as much as it fell this month, that was enough now to push it into 5-star territory from 4-star territory. Overall, still no change in our long-term investment thesis, really no change in our forecasts among the software stocks. This is the one that our team has the most confidence in. Fundamentally, the company is still doing very well here in the short term. Fundamentals look very strong. If you look at some of the AI portions of their business, like Agentforce and Data 360, their annual recurring revenue is still up over 200% year over year. Last quarter, they noted that revenue was up 12%. Their fiscal 2027 guidance was increased slightly.

As far as valuation metrics go, this company trades at 11.4 times our earnings estimate for this year. Again, that current price is telling me in that current P/E valuation that the market is still looking for a very significant contraction over time. If they can just keep revenue and earnings not only growing, but even if revenue and earnings were to somewhat stagnate here at that 11.5 times P/E, I still think the stock looks undervalued here. This is one where—if you think the same kind of lines that we do, that companies will use AI to increase the economic value of their products and that they’ll continue to keep their customers—a lot of these software stocks look very undervalued. If you’ve got the opposite opinion—you think AI is going to disrupt or displace a lot of these software companies—then yes, they probably still have further to fall.

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