Should You Buy Salesforce Stock After the Huge Investor Update? | CRM Stock Analysis

Ajouté : 2026-05-30

[00:00:00]Salesforce informed investors on May 27, 2026 that in their first quarter of fiscal year 2027, the company repurchased over $27 billion of their stock.

[00:00:13]I'll discuss that development and others, including the company's revenue and profitability in its most recently completed quarter, and update you on what I believe is a fair value for the stock and my personal buy, hold, or sell rating.

[00:00:28]>> I want to thank The Motley Fool for sponsoring this video. Visit for the 10 best stocks to buy now.

[00:00:37]>> One of the more important numbers to evaluate when you're considering Salesforce is the company's remaining performance obligations because these eventually turn into revenues. These are contracts that the company has signed and eventually will turn into revenue.

[00:00:54]The [snorts] company is not allowed to recognize, let's say they sign a 10-year deal worth $1 billion, they're not allowed to put $1 billion in revenue in the quarter that they signed the contract. Instead, they have to prorate that amount over the 10-year period and recognize as they move forward. The $1 billion goes into remaining performance obligations. And so, you like to see that figure increasing because it's a signal of what the company's revenue and profits will be like in future periods.

[00:01:28]And this figure in the most recent quarter increased by 11% to $68 billion.

[00:01:35]Overall revenue in the first quarter came in at 11.1 billion, which was up 13% year over year.

[00:01:42]Now, if I had everything my way, I would like to see a company reporting RPO growth ahead of its revenue growth. And that would signal to me that the company's revenue growth rate is either going to remain at its current level or increase. Instead, we got slightly lower RPO growth compared to revenue for Salesforce.

[00:02:07]Additionally, the company reported first quarter GAAP operating profit margins of 21.8% which is a solid number and that's been increasing over the years for Salesforce especially after the company in late 2022 initiated major cost-cutting initiatives and those initiatives are paying off in the years afterward.

[00:02:31]Operating cash flow increased by just 3% to 6.7 billion and free cash flow increased by just 4%. Those figures are a little bit concerning given that the company reported revenue growth of 11%.

[00:02:46]The cash flow growth did not increase by a similar number.

[00:02:51]As I mentioned in the introduction, they returned 27 and a half billion dollars to shareholders, most of which came through share buybacks of over 27 billion dollars. That's a massive buyback. I mean, to put the figure into context, that's almost three times the revenue number that the company reported in the quarter and compared to the cash flow number, that's over roughly four times the cash flow the company generated in the quarter.

[00:03:21]This is one of the largest share buybacks proportionally speaking that I've seen in all of 2026.

[00:03:29]A huge indication from the management team that they believe the shares are undervalued and I agree with them. I've felt that Salesforce shares have been and are undervalued at current market prices.

[00:03:45]You can see on a forward price to earnings and forward price to operating cash flow, Salesforce stock has never been cheaper. on a forward price to earnings of 12.7 compared to a forward price to operating cash flow of 8.39.

[00:04:01]These are ridiculously cheap valuations that incorporate the major risk of artificial intelligence taking market share. Cuz if you exclude that risk for the future and you just look at the business, you just look at the revenue growth, the RPO, the margins, the returns on invested capital, if you just look at the current numbers and the trend lines of the current numbers, this business would typically attract a lot more investor enthusiasm and would trade at more expensive valuation. But it's that unknown risk from artificial intelligence that's weighing on the valuation, bringing it down, and in my opinion, bringing it down more so than is justified according to the risk of losing revenue and profitability.

[00:04:51]team is trying to convince investors that AI is an opportunity for them and not a negative. And I'll be honest, they're not making this case successfully.

[00:05:03]The market just doesn't believe what the management team is saying here. They're saying that agentic AI is the biggest growth opportunity for their customers.

[00:05:14]They remain confident in delivering organic revenue acceleration in the second half of fiscal year 2027, which is their current fiscal year. And the stock market is not giving the company credit for agentic AI as an opportunity.

[00:05:30]Instead, the stock market is discounting Salesforce stock because they're applying a risk premium to agentic AI, hurting the business, not helping the business. Surprisingly, the share price is flat in the after market hours following the company's earnings release. And flat I say is surprising because usually after a company reports quarterly financial results, there's a lot of volatility in the share price up or down. It's rarely that the share price is relatively flat following a company's quarterly earnings release.

[00:06:08]From what I saw from Salesforce, I would have expected the share price to be higher following this update. But there could be something being said during the conference call, which is happening right now as I'm speaking, that I have not yet evaluated that could be impacting and weighing on the company's share price.

[00:06:28]And you can see just in the time that I've been discussing and we've been watching the share price, it's turned positive up almost a percent. So the management team initiated their second quarter revenue guidance of about 10.5% year-over-year revenue growth, and they raised the midpoint of their 2027 estimate. They now expect revenue to increase by 11% year-over-year at the midpoint. However, they did downgrade their operating profit margin guidance of 20.6% and their operating cash flow guidance to 4 to 5%. And I will point out something here. When the numbers are moving higher, a management team will usually mention that and say we're raising our guidance. But when the guidance is moving lower or it's decreasing, they will use different words. They'll use updates instead of saying downgrade, or they'll just neglect to mention where the number was before and just give you the new number. I mentioned that I've felt Salesforce stock was undervalued coming into this earnings release, and I calculated a fair value for the business at $287 per share. The current market price is $177 per share, not including any of the price movement in the after-market hours.

[00:07:54]So, after what I saw from Salesforce in the current quarter, seems like we didn't see any big negative, and that's what I'm really looking out for from these software companies is a continuation of performance. I don't need to see anything remarkable. I don't need to see anything improving dramatically because the stock price is not reflecting that need for improvement. What the stock price is reflecting is a major setback on the horizon anytime now, any moment now. The company's going to experience a big drop-off in revenue, a big drop-off in profitability. And every quarter we move forward without seeing a big drop-off is another positive indication that maybe the business can defend itself against the risks from artificial intelligence, the risk factor is diminished, and the valuation could increase to normal levels without without that big negative impact from the risk premium. So, all in all, I still like the risk versus reward for Salesforce stock at current market prices, and I updated and reiterated my buy rating for Salesforce after I evaluated the company's quarterly financial results.