Is it the right time to buy Salesforce shares?

Let's start by reviewing how tech stocks share prices have performed over the last few years.

Market Downtrend

In November 2021, the share price of significant tech stocks had escalated to record levels. Salesforce's share price crossed the $300 per share mark, and virtually all other major tech stocks reached their all-time highs. However, a downturn in tech stocks began and persisted until about Q4 2022, during which the share prices of the nine tech stocks mentioned below fell below their November 2021 values:

• Amazon
• Apple
• Google
• Hubspot
• Meta
• Microsoft
• Oracle
• SAP
• Salesforce

Here we see the share prices of these 9 companies relative to their 01 Nov 2021 value:

Relative to just 14 months before Facebook and Meta were worth a mere 35% of their past value and Salesforce was only marginally better at 44%. Some companies such as Apple and Oracle were less affected with their values maintaining about 85% of their original values.

Market Uptrend

Had we had a crystal ball at the end of 2022 this was the time to buy across all tech stocks. All of these 9 stocks has seen their share prices rise this year.

Apple and Oracle's share price now exceed their Nov 2021 values and all others have regained at least 30% of their value since 01 Jan 2023. However, Salesforce's share price is still only 70% of where is was in Nov 2021 and this compares unfavourable against all but Hubspot in this group of tech stocks.

Will Salesforce's stock price rise further?

Salesforce's share price has consistently relied on its ability to sustain revenue growth, which is why it trades at a hefty p/e ratio, typically above 100, and currently at 500 in the last quarter (see here). This contrasts with Oracle, which has a PE ratio of 20-30. As companies expand, maintaining high growth becomes increasingly challenging. Salesforce has upheld growth better than virtually all other large tech firms, but the recent slowdown has been a significant factor in the depressed share price.

So the key question is can Salesforce get back to 20%+ annual growth perhaps by riding the AI wave with its own Einstein AI tools and the introductions of the ChatGPT suite of Salesforce tools.

It's an amazing company and the next few quarters will show if it can continue innovating and growing while at such a size. My money is on yes. Please let me know your thoughts.

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