We recently published a list of 11 trending AI stocks according to the latest news and analyst ratings. With Salesforce Inc. (NYSE:CRM) ranking second on the list, it deserves a closer look.
Investors remain cautious after a major global sell-off rocked markets last week on recession fears. Analyst warnings about tech companies’ astronomical capital spending and lack of transparency on returns are also likely to keep tech companies’ valuations in check in the coming weeks.
Speaking to CNBC last month, Roger McNamee of Elevation Partners referenced a Goldman Sachs report that said returns on AI investments could fall short of investors’ expectations.
“The level of capital investment in this sector, currently in the billions of dollars, is so high that it is almost inconceivable that we will achieve a return in the next few years that justifies this level of investment,” McNamee said.
Speaking to Bloomberg, Aisa Ogoshi of JPMorgan Asset Management said there was some “adjustment” ahead in technology stocks as she expected the AI-centric rally to expand to other sectors.
“The key is to keep an eye on earnings trends. It’s easy to panic in these times, but seriously, we should just sit down, look at the numbers and reassess our positioning.”
When asked if she plans to reduce her exposure to AI stocks in the coming days, the analyst said she will be “more selective” in AI investments and increase the quality of stocks in the portfolio.
For this article, we’ve selected 11 trending AI stocks based on the latest news, earnings, and analyst ratings. For each stock, we’ve mentioned the number of hedge fund investors. Why do we care about the stocks hedge funds invest in? The reason is simple: Our research has shown that we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (Further details can be found here).
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Salesforce Inc (NYSE:CRM)
Number of hedge fund investors: 154
BofA Securities believes Salesforce Inc. (NYSE:CRM) is one of the best fallen technology stocks and offers an attractive entry point after the recent sell-off.
According to Yahoo Finance data, Salesforce Inc (NYSE:CRM) is expected to grow earnings at a rate of about 16% per year over the next five years. The data also shows that the company is expected to deliver double-digit year-over-year EPS growth for the next ten out of eleven quarters.
While Salesforce Inc (NYSE:CRM) is primarily a customer relationship software company, with notable tools and platforms such as Sales Cloud, Service Cloud, Marketing Cloud, Tableau, MuleSoft, and Slack, its most promising platform when it comes to AI and software is Data Cloud. The platform is experiencing 90% year-on-year growth and will generate $400 million in fiscal 2024. What does this platform do? It helps companies process data from different departments and third-party cloud solutions. Powered by an AI-driven data engine, it analyzes metadata in real-time to provide valuable insights and support sales, marketing, and customer service workflows.
At the end of the first quarter, Salesforce Inc (NYSE:CRM) had $17.7 billion in cash and low debt.
Mizuho Securities analyst Gregg Moskowitz believes the company is still “well positioned” to help customers digitally transform. However, the analyst believes Salesforce Inc. (NYSE:CRM) would achieve this by prioritizing profitable growth. The analyst reiterated his buy rating on the stock but lowered his price target to $300 from $345.
Morgan Stanley analyst Keith Weiss, who rates Salesforce Inc. (NYSE:CRM) overweight and has a $320 price target, said Salesforce’s PEG ratio of 1.2 shows the market is not pricing in operational discipline and sustainability of earnings growth.
Poland Focus Growth Strategy made the following statement on Salesforce, Inc. (NYSE:CRM) in its Investor letter Q2 2024:
“Salesforce, Inc. (NYSE:CRM) saw its earnings decline nearly 20% due to a slowdown in revenue and order growth, part of a broader trend we’re seeing in enterprise software as companies defer spending on large projects amid the uncertain macroeconomic environment. As previously mentioned, a narrative has emerged of prioritizing spending on AI, cloud, and security over spending on enterprise software, which could ultimately hurt workplace-based software in the long run. While there may be some dollar shifts toward GenAI in the near term, we believe the mission-critical enterprise software market will remain robust going forward. We’ll be monitoring the position closely, but continue to believe Salesforce, with its mission-critical software and high customer retention rates, is well positioned to weather these headwinds, lean on its pricing power, and effectively monetize generative AI in its product suite.”
Overall, Salesforce Inc. (NYSE:CRM) ranks 2nd on Insider Monkey’s list of the title 11 trending AI stocks according to the latest news and analyst ratings. While we recognize the potential of Salesforce Inc. (NYSE:CRM), we believe AI stocks promise higher returns and do so in a shorter period of time. If you’re looking for an AI stock that shows more promise than CRM but trades at less than 5 times earnings, read our report on the cheapest AI stock.
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Disclosure: None. This article was originally published on Insider Monkey.
