Salesforce (CRM): An ever-growing industry or a bubble about to burst?

• Autor(a) principal: Nina, Leonor Martins Durão Pereira
• Data de Publicação: 2020
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10362/115568
• topic: Cloud-computing; Salesforce; Valuation; Crm; Domínio/Área Científica::Ciências Sociais::Economia e Gestão

This thesis is an equity research on software-as-a -service company, Salesforce. It explores the impact of trends in the macroeconomic market, namely the rise in demand for multi- device cloud services, internet of things (IoT) and artificial intelligence (AI). An analysis of the company’s microeconomic factors such as its margins, its CAPEX, NWC and cash conversion cycle enabled us to better assess the evolution of the company, given a benchmark of tier 1 comparable companies; Adobe Inc and SAP SE within the industry. These features helped determine projections for forecasts of Salesforce, in order to price the company and establish a recommendation. As such, we found that Salesforce is a market leader in terms of revenues in its respective markets; it is investing heavily in cross-selling and upgrading current features of services whilst also expanding into other areas; the company is operating under a poor cash conversion cycle with plenty of room for negotiation opportunities; and the industry is becoming very vigorous in terms of market competition. Considering our findings, we predict that Salesforce would withstand any adverse market conditions, due to its competitive advantage as a cloud only operator and outperform market expectations given its vigorous growth strategy. We believe Salesforce is a good buy, as it is currently under priced relative to its growth opportunities. Salesforce has a track-record of outperforming analysts’ revenue estimates, and operational efficiencies coupled with favourable market conditions will help bolster this appreciation to a share price of $178.5.