Salesforce (NYSE:CRM) Stock Upgrade: Piper Sandler Predicts Doubling Free Cash Flow by 2029
Piper Sandler Upgrades Salesforce to "Overweight" with Projected $20 FCF per Share by 2029
Investing.com - In a significant upgrade, Piper Sandler has shifted its stance on Salesforce (NYSE:CRM) from “neutral” to “overweight,” citing a compelling risk-reward profile for the software giant.
Key Takeaways:
- Free Cash Flow Surge: Piper Sandler forecasts Salesforce's free cash flow (FCF) per share to double from $9.65 in 2024 to $20 by 2029.
- Valuation Advantage: Salesforce boasts the lowest valuation multiples among large-cap software peers on EV/S, EV/FCF, and P/E metrics.
- Strategic Initiatives: New pricing and packaging strategies are expected to boost multi-cloud adoption, while innovations like Agentforce powered by the Atlas Reasoning Engine and Data Cloud could stabilize and potentially drive demand recovery by 2026.
- Revised Estimates: The price target is increased to $325 from $268, based on a new target EV/FCF of 23x and a 14% discount rate.
Detailed Insights:
Free Cash Flow Projections:
Piper Sandler's bullish outlook is anchored on a substantial increase in Salesforce's free cash flow per share. Even with conservative top-line growth estimates of 8-9%, the projected doubling of FCF underscores the company's robust financial health and operational efficiency.
Comparative Valuation:
Relative to its large-cap software peers, Salesforce is trading at the most attractive valuation multiples. This includes measures like Enterprise Value to Sales (EV/S), Enterprise Value to Free Cash Flow (EV/FCF), and Price to Earnings (P/E). Such a favorable valuation profile enhances the stock's attractiveness to investors seeking value in the tech sector.
Strategic Enhancements:
Conversations with Salesforce's leadership, partners, and customers have bolstered Piper Sandler's confidence in the company's strategic direction. Enhanced pricing models and new packaging are anticipated to widen the adoption of Salesforce's multi-cloud offerings. Additionally, the integration of Agentforce with the Atlas Reasoning Engine and Data Cloud is expected to support demand stabilization and drive growth from 2026 onwards.
Revised Estimates and Price Target:
Aligning with these optimistic projections, Piper Sandler has raised its price target for Salesforce to $325, up from $268. This revision is based on an increased target EV/FCF multiple of 23x, compared to the previous 22x, and a lowered discount rate from 16% to 14%.
Conclusion: How This Affects You
If you're an investor, Salesforce's upgraded rating and optimistic financial projections signal a potentially lucrative opportunity. The anticipated doubling of free cash flow per share by 2029, coupled with attractive valuation metrics, makes Salesforce a compelling addition to a diversified investment portfolio.
For those less familiar with financial jargon, here's what it means in simple terms: Salesforce is expected to generate a lot more money in the coming years, making its stock more valuable. The company's new strategies and technologies are likely to attract more customers, boosting its growth and stabilizing its market position. Therefore, buying Salesforce stock now could yield significant returns by 2029.
In essence, Piper Sandler's upgrade suggests that Salesforce is a good bet for both current and prospective investors looking to enhance their financial standing through savvy stock investments.