Salesforce Stock Upgraded as AI Push Could Double Free Cash Flow by 2029
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On Wed, 25 Sept, 12:04 AM UTC
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Salesforce's Free Cash Flow Could Double by 2029 Amid AI Push, Analyst Says While Upgrading Stock - Salesforce (NYSE:CRM)
New pricing, packaging, and AI integration could drive Salesforce's recovery by 2026, says analyst. Piper Sandler analyst Brent Bracelin upgraded Salesforce Inc CRM from Neutral to Overweight and raised the price target from $268 to $325. The re-rating reflects a favorable risk-reward given the potential for free cash flow per share to double to $20+ by fiscal 2029 (calendar 2028) from $9.65 in fiscal 2024 (calendar 2023), even if top-line growth remains at subdued levels of 8%-9%. Bracelin flagged that Salesforce also has the lowest valuation multiple relative to large-cap software peers on an Enterprise Value-to-Sales, Enterprise Value-to-Free Cash Flow, and Price-to-Earnings basis. Also Read: NVIDIA, Salesforce Announce Strategic AI Collaboration: What To Know Discussions last week with the leadership team, partners, and customers gave the analyst confidence that new pricing and packaging could broaden multi-cloud adoption. The promise of Agentforce powered by the Atlas Reasoning Engine paired with Data Cloud could help stabilize demand and drive a recovery entering calendar 2026 (fiscal 2027). Bracelin raised estimates using a target EV/FCF of 23x (versus 22x prior) and a 14% discount rate (16% prior). Bracelin noted that the combination of free multi-cloud options via the new Foundations suite for existing Sales or Service cloud customers and the 52% ARPU uplift to Einstein 1 versus Unlimited could be crucial in sparking a growth recovery from calendar 2025 (fiscal 2026) to calendar 2026 (fiscal 2027). The analyst flagged that Salesforce has historically provided new platform updates three times per year. However, the pace of AI has changed this cadence, most notably within Data Cloud, where new platform updates are released monthly. Salesforce chief Marc Benioff and team are operating in "founder mode" with the accelerated pace of internal product execution, supported by veteran boomerangs and new management add that bring strong backgrounds from Microsoft Corp MSFT, Amazon.Com Inc AMZN Amazon Web Service, Alphabet Inc GOOG GOOGL Google, Oracle Corp ORCL, and more Bracelin highlighted. Years of manual Trailblazer developer work building Flows and Apex Actions have turned into a strategic advantage, according to the analyst. He added that these can be repurposed to provide critical guard rails to power agents via the Atlas Reasoning Engine paired with Data Cloud. Further margin leverage and buybacks could sustain low double-digit free cash flow growth per share for the next 3-5 years. CRM shares could benefit from earnings and multiple expansions, as per Bracelin. Bracelin projects third-quarter revenue of $9.34 billion and EPS of $2.43. Price Action: CRM stock is up 1.35% at $267.67 at the last check on Tuesday. Also Read: Salesforce Unveils New Agentforce Partner Network, Partners With Google Cloud Photo via Shutterstock Market News and Data brought to you by Benzinga APIs
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Piper Sandler upgrades Salesforce stock, sees potential for FCF to double by 2029 By Investing.com
On Tuesday, Piper Sandler expressed a positive outlook on Salesforce.com, Inc. (NYSE:NYSE:CRM), raising the stock's rating from Neutral to Overweight and increasing the price target to $325 from the previous $268. The firm's decision is based on the anticipation of a significant rise in Salesforce's free cash flow (FCF) per share. The analysis by Piper Sandler suggests that Salesforce's FCF per share could potentially double to over $20 by fiscal year 2029 (calendar year 2028) from $9.65 in fiscal year 2024 (calendar year 2023). This projection holds even if Salesforce's top-line growth remains at a modest rate of 8-9%. The firm noted that Salesforce's valuation multiples, including enterprise value to sales (EV/S), enterprise value to free cash flow (EV/FCF), and price to earnings (P/E), are the lowest among its large-cap software peers. Piper Sandler's confidence in Salesforce has been bolstered by recent discussions with the company's leadership, partners, and customers. These conversations have led to the belief that Salesforce's new pricing and packaging strategies could expand the adoption of its multi-cloud offerings. Additionally, the introduction of Agentforce, powered by the Atlas (NYSE:ATCO) Reasoning Engine, in conjunction with the Data Cloud, is expected to help stabilize demand or possibly drive a recovery as the company moves into calendar year 2026 (fiscal year 2027). The firm has adjusted its estimates for Salesforce and has applied a target enterprise value to free cash flow multiple of 23 times, up from the previous 22 times. Furthermore, Piper Sandler has lowered the discount rate used in its valuation from 16% to 14%, contributing to the higher price target. Salesforce's stock is now poised for potential growth according to the investment firm's analysis, with the revised price target reflecting an optimistic outlook for the company's financial performance in the coming years. In other recent news, Salesforce.com has reported strong second-quarter earnings, with earnings per share reaching $2.56, exceeding the consensus estimate of $2.36. The company also noted an 8% increase in sales, primarily driven by a 9% rise in subscription and support revenues. Salesforce has also entered into a definitive agreement to acquire Own Company, a data protection and management solutions provider, for $1.9 billion in cash. The company's recent DreamForce conference showcased Agentforce, a significant development in AI Agent platforms, which has been met with enthusiasm. This AI-driven suite of autonomous bots has reportedly sparked interest and could potentially re-accelerate subscription revenue growth. Analyst firms such as BofA Securities, TD Cowen, Needham, and Baird have maintained their ratings on Salesforce, while Truist Securities revised its price target for Salesforce to $300, maintaining a Buy rating. However, Erste Group downgraded the stock from Buy to Hold due to projected slower growth. Salesforce also announced a partnership with IBM (NYSE:IBM) to integrate advanced AI capabilities into its platform and reported a significant increase in the adoption of its Data Cloud platform, with a 130% year-over-year growth in its paid customer base. These are among the recent developments in Salesforce's ongoing efforts to remain at the forefront of the CRM industry. Piper Sandler's upbeat assessment of Salesforce.com, Inc. (NYSE:CRM) is mirrored in the company's strong financial health and investment potential as indicated by the latest data from InvestingPro. Salesforce boasts an impressive gross profit margin of 76.35% for the last twelve months as of Q2 2025, highlighting the company's efficiency in generating revenue relative to its cost of sales. This robust margin underpins the firm's positive outlook on Salesforce's ability to expand its free cash flow in the years ahead. In addition, Salesforce's management has demonstrated confidence in the company's prospects through aggressive share buybacks, a strategy that often reflects a belief in the stock's undervaluation and a commitment to enhancing shareholder value. This aligns with Piper Sandler's raised price target and suggests that the company's leadership is also optimistic about Salesforce's future performance. InvestingPro also notes that Salesforce is trading at a low P/E ratio relative to near-term earnings growth, with a P/E ratio of 45.46 and an adjusted P/E ratio for the last twelve months as of Q2 2025 at 41.92. This could indicate that the stock is undervalued given the company's earnings prospects, further supporting the potential for stock price appreciation. For investors seeking comprehensive analysis and additional insights, there are 13 more InvestingPro Tips available for Salesforce, which can be explored for a deeper understanding of the company's financials and market position. These tips can be accessed through the InvestingPro platform at https://www.investing.com/pro/CRM, providing valuable information to help make informed investment decisions.
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Piper Sandler upgrades Salesforce stock to Overweight, citing potential for free cash flow to double by 2029 due to AI integration and operational efficiency improvements.
Salesforce Stock Upgrade
Piper Sandler has upgraded Salesforce (NYSE:CRM) stock from Neutral to Overweight, setting a new price target of $284 1. This upgrade comes as analysts project significant growth potential for the company, largely driven by its artificial intelligence (AI) initiatives and operational improvements.
Free Cash Flow Projections
The most striking aspect of Piper Sandler's analysis is the projection that Salesforce's free cash flow could potentially double by 2029 2. This optimistic outlook is based on several factors, including the company's AI integration efforts and enhanced operational efficiency.
AI Integration and Growth Drivers
Salesforce's push into AI, particularly with its Einstein GPT offering, is seen as a key driver for future growth. The company's AI solutions are expected to boost productivity and create new revenue streams, contributing significantly to the projected increase in free cash flow 1.
Operational Efficiency
Piper Sandler analysts have noted Salesforce's improved operational discipline as another factor contributing to their positive outlook. The company's focus on enhancing efficiency is expected to play a crucial role in driving profitability and cash flow growth in the coming years 2.
Market Position and Competition
Despite facing competition in the AI space, Salesforce is well-positioned to capitalize on the growing demand for AI-integrated business solutions. The company's established market presence and ongoing innovation efforts are seen as key advantages in maintaining and expanding its market share 1.
Investor Sentiment
The upgrade from Piper Sandler has positively impacted investor sentiment. Salesforce stock saw an increase following the announcement, reflecting growing confidence in the company's long-term prospects and its ability to leverage AI for substantial growth 2.
Future Outlook
As Salesforce continues to integrate AI into its offerings and improve operational efficiency, analysts expect the company to maintain its growth trajectory. The projected doubling of free cash flow by 2029 suggests a strong financial future for the company, potentially leading to increased shareholder value and market dominance in the coming years 1 2.
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