Salesforce stock is down nearly 30% YTD. Why do analysts believe in a reversal?

Only convincing signals that the company is stabilizing and returning to sustainable revenue growth can change investors' pessimistic attitude toward Salesforce, the world's largest developer of CRM-systems, says Hilary Frisch, senior analyst at ClearBridge Investments. However, such signs are not yet observed: investors fear that the rapid development of AI will weaken demand for Salesforce products. The market is now awaiting the company's new earnings report, which will be released after the market closes on December 3. Amid the uncertainty, Salesforce shares have fallen about 30% since the beginning of the year.

Hilary Frisch, senior analyst at ClearBridge Investments, believes that negative investor sentiment towards Salesforce may change signs of stabilization and recovery of the company's business growth rate. Now Salesforce shares are at a record low price, but investors are in no hurry to buy securities, Bloomberg points out. The market is alarmed by growing concerns that the development of artificial intelligence could weaken the growth prospects of the organization.

Salesforce will publish reports after the close of trading on December 3. Earlier in the updated forecast the company assured the market that a favorable period lies ahead and predicted double-digit revenue growth in the coming years, Bloomberg writes.

"If Salesforce's predictions come true, the company's current valuation looks undervalued and could prove interesting to long-term investors. I expect stability and improved performance to emerge over the next 12-18 months, but this report is unlikely to be a tipping point - concerns about the impact of AI are still too strong," Frisch says.

Bloomberg specifies that while Salesforce's forecast somewhat allayed investors' concerns about a possible slowdown in growth, it didn't dispel Wall Street's main worry: whether AI services from companies like OpenAI will start to crowd out Salesforce's products and reduce demand for them. The company has its own developments, including a new line of Agentforce AI agents that automates some workflows. But investors don't yet expect them to contribute much to financial results - and doubt that Salesforce can confidently compete in a market dominated by big AI players. This is evident at least from the fact that consensus revenue and earnings forecasts for next year haven't changed in 12 months, the agency points out.

Citi analyst Tyler Radke noted in a Nov. 26 note, "While interest in Agentforce and Data Cloud is high, real-world adoption of Agentforce remains limited for now. We await broader launches and evidence of commercial success before moving to a more positive assessment."

It's not just Salesforce that is under pressure. Shares of the entire SaaS segment are declining amid concerns that AI development could undermine their business models: the Morgan Stanley Thematic Index fell 12% in 2025.

The paradox is that the actual impact of AI on the results of companies will manifest itself only later, Bloomberg specifies. For example, Salesforce is expected to increase net profit by 11% and revenue by 8.8% in the current fiscal year. And both figures are projected to accelerate growth in the following years: by 2029, profits are expected to grow by about 20% and revenue by 11%.

Some analysts believe that the market is reacting too sharply. KeyBanc Capital Markets estimates that SaaS companies' securities are generally trading at a 30-40% discount to their fundamental metrics. "Current valuations look like growth is just breaking even, but the worst-case scenario is unlikely. We expect results to be better than the market expects," wrote analyst Jackson Ader.

Salesforce shares were up 1.3% at the premarket on Dec. 3. However, the year as a whole has been extremely bad for the stock: since the beginning of 2025, it has fallen in price by about 30%, becoming the second worst asset in the Dow Jones index and entering the list of 25 outsiders of the S&P 500. At the same time, the companies that the market considers to be the main beneficiaries of AI development - Microsoft, Oracle and Palantir - are showing strong growth in their shares.

The drop in stock prices has pushed Salesforce's valuation down to its lowest levels since its 2004 IPO. The stock now trades at less than 19 times projected earnings for the next 12 months - noticeably below the average multiple over the past decade (47) and below the market average for the S&P 500 (about 22).

Analysts' average target price over a 12-month horizon is about $325, which implies a nearly 40 percent upside from the current price. According to this indicator Salesforce is among the ten securities in the technology sector of the S&P 500 with the greatest potential, notes Bloomberg.

"The sentiment toward SaaS companies right now is very gloomy. But there are services that businesses can't run without, and there are services that can easily be replaced by AI," says Brad Conger, chief investment officer at Hirtle Callaghan. - Salesforce is closer to the mission-critical category, and I think investors should pay attention to it. However, there are no guarantees: the field is very heterogeneous right now, and it will take time to understand which companies will be able to adapt to the AI era and only maintain their positions, and which companies will benefit from the new technology and be among the leaders.

This article was AI-translated and verified by a human editor