Salesforce's (NYSE:CRM) stock has tripled over the past five years as it's impressed investors with its robust revenue growth and stabilizing profits. But can the cloud services company replicate those gains over the next five years? Let's take a closer look at its long-term tailwinds to find out.

Maintaining its lead in the CRM market

Salesforce controlled 19.8% of the global customer relationship management (CRM) market in the first half of 2020, according to IDC. The firm has named Salesforce the market leader for seven straight years.

Salesforce's four closest rivals -- SAP, Oracle, Microsoft, and Adobe -- held a combined share of just 17.8% in the first half of 2020. It's doubtful those rivals will catch up to Salesforce within the next five years.

A network of cloud computing connections.

Image source: Getty Images.

The global CRM market, which was valued at $40.2 billion in 2019, could continue expanding at a compound annual growth rate (CAGR) of 14.2% from 2020 to 2027, according to Grand View Research. If Salesforce matches that growth rate, its annual revenue could more than double from $21.1 billion in fiscal 2021 (which ends this month) to over $53 billion in fiscal 2028.

$50 billion in revenue by fiscal 2026

Salesforce's own estimates outpace that forecast. At its investor day presentation in December, management estimated the company would generate over $50 billion in annual revenue in fiscal 2026 -- which would represent a CAGR of 19% between fiscal 2021 and 2026.

It expects Slack (NYSE:WORK), the enterprise communication company it recently agreed to acquire in a $27.7 billion deal, to grow at a CAGR of 38% between fiscal 2022 and 2026 and generate $4 billion in annual revenue in the final year. It expects its core business, which includes its CRM platform and other cloud services, to grow at a CAGR of 17% during that period.

Salesforce's stock already looks cheaper than those of many other high-growth cloud stocks at eight times next year's sales. However, its revenue estimates for 2026 indicate the stock could easily double within the next five years while maintaining the same price-to-sales ratio.

Growth across its core markets

Salesforce expects the total addressable market (TAM) of its entire portfolio of services to grow at a CAGR of 11% between fiscal 2021 and 2025 into a $175 billion market. Here's the breakdown of that forecast by sector:

Market

Fiscal 2021 TAM

Fiscal 2025 TAM

Sales

$14 billion

$21 billion

Service

$20 billion

$32 billion

Marketing & Commerce

$24 billion

$41 billion

Platform

$24 billion

$32 billion

Analytics & Integration

$34 billion

$49 billion

Source: Salesforce investor day presentation.

In sales, Salesforce expects demand for streamlined sales teams and end-to-end solutions for pricing, billing, and order management services to continue rising. In services, it expects more businesses to use omnichannel tools like chatbots, voice, and messaging services to serve customers.

In marketing and commerce, Salesforce expects the accelerating growth of the e-commerce and fintech markets to drive demand for its services. For its main platform, it expects automation and simpler coding systems to support its long-term growth. In analytics and integration, it expects more businesses to crunch cloud-based data to make data-driven business decisions.

In other words, Salesforce expects the tailwinds that drove its growth over the past five years to continue for the foreseeable future. It will likely buy and integrate smaller companies, as it did with MuleSoft, Tableau, and Slack over the past three years, to increase its exposure to those growing markets.

Prioritizing revenue growth over profits

Salesforce's GAAP and non-GAAP profits improved significantly over the past five years.

EPS

2016

2017

2018

2019*

2020*

GAAP

($0.07)

$0.26

$0.17

$1.43

$0.15

Non-GAAP

$0.75

$1.01

$1.35

$2.75

$2.99

Source: Salesforce. *Includes benefits from a new accounting standard.

Salesforce's profits stabilized as its scale improved, which evened out its infrastructure expenses and reduced its costs of acquiring new customers. Salesforce expects its non-GAAP earnings to grow 55% in fiscal 2021.

But next year, analysts expect Salesforce's non-GAAP earnings to decline 25% as it ramps up its ecosystem investments and integrates Slack's unprofitable business.

Salesforce's earnings growth could remain bumpy over the next five years as it prioritizes revenue growth and the expansion of its ecosystem over its short-term margins. However, that's a smart strategy for a growing cloud services company, and could help it maintain its lead in the CRM market while expanding the reach of its marketing, e-commerce, and analytics services.

Where will Salesforce be in five years?

Salesforce's stock remains cheap relative to its growth, and it's riding high on several secular growth trends. I believe Salesforce's stock could double or triple within the next five years as more businesses deploy its services to streamline their operations, tether more services to the cloud, automate repetitive tasks, and reduce their overall dependence on human employees. Salesforce might not be as exciting as some younger tech stocks, but it should deliver much more reliable returns.