Salesforce Stock Down 17% in Six Months: Should Investors Buy the Dip?

Core Insights - Salesforce, Inc. (CRM) shares have decreased by 16.8% over the past six months, underperforming the Zacks Computer and Technology sector which gained 10.8% [1] - The decline raises questions about whether this is a buying opportunity or a signal to move on from Salesforce stock, despite strong fundamentals still supporting investment in CRM [1] Performance Overview - Salesforce's revenue growth has slowed from double digits to single digits, with a year-over-year increase of only 8.7% in the first nine months of fiscal 2026 [3][4] - The Zacks Consensus Estimate projects revenue growth of 9.5% for fiscal 2026 and 10.9% for fiscal 2027, indicating no significant improvement in the near term [4] Profit Forecasts - Earnings per share (EPS) is expected to grow at a CAGR of 15% over the next five years, a significant drop from the previous five years' CAGR of 27.8% [5] - EPS forecasts for fiscal 2026 and 2027 indicate year-over-year improvements of 15.3% and 10.5%, respectively [5] Market Dynamics - The slowdown in growth reflects cautious enterprise spending amid economic uncertainty and geopolitical pressures, leading businesses to prefer smaller, lower-risk IT investments [4][9] - Salesforce is focusing on enhancing its enterprise software portfolio and integrating AI across its product lines to remain competitive [9] AI Integration and Revenue Growth - Salesforce's AI initiatives, particularly Agentforce and Data Cloud, generated $1.4 billion in recurring revenues in Q3 of fiscal 2026, marking a 114% year-over-year increase [12] - Agentforce alone contributed $540 million in recurring revenues, up 330% year over year, with over 50% of deals coming from existing clients [12] IT Spending Trends - Gartner estimates worldwide IT spending will increase by 9.8% year over year to $6.08 trillion in 2026, with software expected to grow by 15.2% to $1.43 trillion [13] - Despite potential short-term spending slowdowns, digital transformation remains a priority for businesses, ensuring steady demand for Salesforce's solutions [13] Valuation Analysis - Salesforce's stock currently trades at a forward P/E ratio of 14.89, significantly below the sector average of 25.91, indicating that much of the pessimism is already priced in [14] - Compared to competitors like SAP, Microsoft, and Oracle, Salesforce stock is cheaper on a P/E basis [17] Competitive Position - Salesforce has outperformed major competitors in the enterprise software space over the past six months, with Microsoft, SAP, and Oracle stocks declining by 23.1%, 29.2%, and 43.5%, respectively [18] Investment Recommendation - Despite slowing growth, Salesforce's leadership in customer relationship management, focus on AI, strategic acquisitions, and reasonable valuations provide compelling reasons to invest in the stock [19]