Asymmetric Bets
Hedge Fund Analyst, Private Company CFO, Idiosyncratic Stocks & Accelerating Fundamentals
Salesforce is cheap at about 10x EV/GAAP EBITDA and 10x free cash flow without adding back stock compensation, with about $13B of FCF this year, while growing revenue 10%. At that multiple, private equity's software deals would be deeply underwater on a true mark to market. Per @PodcastAlphaX, Box CEO Aaron Levie uses Salesforce five times more after linking its MCP server to Claude Code, a sign agents increase use of the platform rather than replace it. x.com x.comÂ
Salesforce's strong free cash flow and healthy balance sheet support its setup as enterprise AI adoption, Agentforce and AI-driven workflow automation advance. Its earnings gap on four times average volume has been followed by a tightening formation. x.com x.comÂ
Salesforce at a 52-week low trades like a broken business at about 11x forward earnings, yet it is 95% subscription with 77%-plus gross margins and $72 billion of RPO, up 14%. Marc Benioff has repurchased $27.1 billion, cutting diluted shares 10%, and says AI makes Salesforce stronger and the latest quarter had a record volume of large deals. A roughly 1% Anthropic stake bought for about $330 million is now worth over $8 billion, value the market is giving away free. x.comÂ
Okta, Salesforce and Atlassian look insanely expensive at nine times forward revenue against roughly 10% year-over-year growth. Many SaaS firms also have high sales and marketing costs. A commenter flags inference spending, which SaaS investors worry could compress margins; if free cash flow, growth, retention or gross margins weaken, their price-to-sales multiples could collapse. x.com x.com x.com x.comÂ
Salesforce and Adobe still look massively undervalued even after the recent run. Salesforce trades at 18x forward earnings with $14.5B of trailing free cash flow, a 9% FCF yield, raised FY27 guidance of $46.1-46.4B and AI/Data ARR of about $3.9B, up 210%. Adobe trades at 10.6-11.2x forward earnings and 11x free cash flow on $10.3B of FCF, with a 0.8 PEG, 89% gross margin and 42% FCF margin. x.comÂ
Salesforce, at the forefront of CRM for decades, is far likelier to build an even better product for the AI era than companies are to build their own CRM, making it the favorite SaaS name. The case examines what it would take for Salesforce to compound about 27% a year over the next five years. x.com x.com x.comÂ
Salesforce's only bull case is valuation and buybacks, and its 20% drop over five years happened for a reason. Even at about 18x earnings, down from 39x two years ago per @qualtrim, a PEG ratio of 2 means it is not cheap by any means. @StockMarketNerd notes the share count fell 15% year over year on accelerated buybacks, alongside a raised organic growth guide. x.com x.comÂ
Salesforce's $25 billion accelerated share repurchase, the largest ASR in history and half of its $50 billion buyback program, should have an EPS impact people don't yet understand. Its numbers already made it very attractive, and the initial delivery of about 103M shares shows how bullish Marc Benioff is. x.comÂ
Salesforce's valuation has fallen even as earnings nearly doubled. Two years ago it earned $5.56 a share and traded at 39 times earnings; today it earns $10.96 a share at 18 times. x.comÂ
Salesforce is no longer cheap enough given how much wallet share core CRM is losing. Organic growth only matches nominal GDP despite a massive increase in agentic spending, and large enterprises increasingly see Salesforce as a data pipe for their own custom agents, an ex-growth business that deserves a low multiple. The Informatica acquisition doubles down on that weak model. Salesforce was too cheap at 12x non-GAAP earnings, but near high-teens it is fair, and terminal risks have not abated. … Show more
Some software stocks had gotten stupid cheap, including monday.com, Wix, Cellebrite, Adobe, Salesforce and Workday, which makes the sector's rebound welcome. x.com x.comÂ
