salesforce.com (NYSE:CRM) is a growth investor's dream. Shares of the customer relationship management (CRM) software titan are up nearly 50% over the past year and more than 600% over the past decade.
Yet even after these torrid gains, much more growth still lies ahead for this hard-charging juggernaut. In fact, here are three reasons why Salesforce's stock can continue to rise sharply in the years ahead.
1. A massive market opportunity
Salesforce says that the global CRM applications market will grow to $123 billion by 2021, up from $72 billion today. Within this enormous market, Salesforce is the clear leader. The company was recently named the No. 1 CRM provider for the fifth straight year by IDC. Moreover, Salesforce's leadership is broad-based: It's No. 1 in sales, No. 1 in service, and No. 1 in marketing, among other areas. And while Salesforce is already the most dominant force in the global CRM industry, it's continuing to aggressively press its advantage.
2. Impressive market share gains
In fact, Salesforce gained more market share than the rest of the 20 largest CRM suppliers combined in 2017, according to IDC. In turn, Salesforce's share of the global CRM applications market rose to 19.6%, nearly three times that of its closest rival.
3. Strong revenue and cash flow generation
These market share gains are helping to produce tremendous increases in sales and cash flow, particularly for a $100 billion company like Salesforce. The company's revenue surged 25% year over year to $3 billion in the first quarter. That drove a 19% increase in operating cash flow, to $1.5 billion, and a 25% jump in free cash flow, to $1.3 billion.
These robust results prompted Salesforce to boost its full-year sales forecast. The company now expects revenue to rise as much as 25% to $13.125 billion in fiscal 2019.
Looking even further ahead, Salesforce is on pace to hit its goal of generating $21 billion to $23 billion in annual revenue by fiscal 2022.
"Just as we'll be the fastest enterprise software company to reach $13 billion, we're well on our way to surpassing the $20 billion revenue goal faster than any other enterprise software company in history," Chairman and CEO Marc Benioff said during Salesforce's first-quarter earnings call.
All told, CRM is the fastest-growing enterprise software category, and Salesforce has the most impressive growth within it. And while Salesforce is clearly the most dominant force in the global CRM industry, it has long runways for growth still ahead. As such, Salesforce's stock appears likely to continue its ascent in the coming years.
Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends ADBE and Salesforce.com. The Motley Fool owns shares of ORCL and has the following options: short June 2018 $52 calls on ORCL and long January 2020 $30 calls on ORCL. The Motley Fool has a disclosure policy.