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MARKET COMMENT: Stocks on the Move – Every Business Must Have – CRM!

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By Rebecca Ellis

MON, MAY 13 2019-theG&BJournal-Salesforce.com set out in 1999 to remake the approach of old software giants like SAP and Oracle. Instead of massive on-premises software installations requiring constant management and maintenance, Salesforce co-founder Marc Benioff saw software as a service (SaaS). Benioff realized how much the world needed tools that were always current, transparent, and required far fewer client resources.

Twenty years later, the result is the global leader in customer relationship management (CRM) software, and still one of the SaaS-iest companies you will find. We think Salesforce’s success will continue as it widens its focus, provides more to existing customers, and wins new ones.

CRM is a necessity, not a luxury. No matter the business, companies need to know who their customers are. Salesforce’s tools let clients turn their customers’ interest into action, browsing into purchases, familiarity to engagement, and so on. Salesforce is the clear leader in CRM — far ahead of its rivals in its vision and its ability to execute. Strong demand shows up in sales trends. Salesforce’s revenue was up 26% last year, remarkable enough for a company this size.

Benioff has laid out a broad vision of the company achieving sales of USD 20 billion in 2022, USD 40 billion in 2028 and USD 60 billion by 2034. The company expects sales of USD 16 billion this year, a trajectory that suggests the company is surpassing its ambitious targets.

Today, Salesforce’s stock trades at around 45 times free cash flow — which certainly makes the company look expensive, just as it has throughout its ascent. But if revenue reaches USD 23 billion in just three years, it is well worth the price. Its current free cash flow margin — 21% — suggests it could produce around USD 4.8 billion in cash flow in fiscal 2022 and USD 8.4 billion in fiscal 2028, multiples that already start to look less inflated.

EDITOR’S NOTE: If you would like to receive more information or understand whether these stocks are appropriate choices for your portfolio, we loved to hear from you and please drop us a line by telephone or send us a mail.

Rebecca Ellis is a Personal investment advisor, based in Zurich|rebecca.ellis@pomonawealth.com|pascal.crepin@pomonawealth.com.

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