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Salesforce's Incredible Market Growth Opportunity

By Clay Bruning and Brian Withers – Oct 7, 2021 at 9:15AM

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As companies rush to the cloud, they need products to help them make the most of it.

During its investor day presentation, Salesforce.com (CRM 0.75%) detailed how companies' increasing need for digital adoption has helped grow its estimated total addressable market by a whopping $44 billion in just the past six months.

In this episode of "Beat & Raise" on Motley Fool Liverecorded on Sept. 27, Fool.com contributors Clay Bruning and Brian Withers discuss how the software-as-a-service company has made the most of its impressive suite of products as the pandemic has fueled these rapid tech transformations.

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Brian Withers: Clay, I think you have the next section where we talked about Salesforce as a customer relationship management software.

Clay Bruning: Yeah, absolutely. Then, as a lot of people might know, obviously, Salesforce ticker is CRM, pretty witty job there by Benioff on being able to get that ticker for the company. One of the most impressive things over the entire presentation was this chart here and management noted that an independent third-party, I believe it's IDC, has increased the TAM that is accessible to Salesforce by $44 billion from just six months ago. That just shows the incredible opportunity and they even noted that this isn't from increasing the markets out there, and it's all from incremental changes in the markets they operated in and they specifically said that it's a testament to the digital transformations in the priority of spends for companies, whether it's technology companies, retail companies, whatever it is, they need to digitize and this is a long-term tailwind that was accelerated, thanks to COVID. Really impressive growth in terms of the addressable market in just six months and as you can see, some of these verticals that they're in are still growing at a pretty rapid rate, notably e-commerce there, which is the fastest, around 16 percent. Just incredible opportunity that they have, which is why consistently throughout the conference, they noted that growth is their Number 1 priority still. They have that long-term goal of hitting $50 billion by sales by the end of their fiscal year '26, which is the end of 2025. Huge opportunity here and we can jump to the next slide here. No, so just again, they have an incredible suite of products. It's worth noting, they have six different units or business units, I should say, with over a billion dollars in sales, and as Deidre alluded to, I think there's one up and coming over the next five, 10 years that might get there. In my opinion, the sustainability Cloud, that could be that seventh segment there. We can jump to the next slide here as well. This is another slide that really stood out to me. When I think of Salesforce and when I used to use it at my previous job, I used it completely in sales and I think probably most people would think they're helping accelerate the sales lifecycle but actually, the Service Cloud has accelerated to the point where it's their biggest segment. Like I said, I used to work in the customer service industry and I used Salesforce more so to log customer interactions. I primarily spend time in a contact center. I would have professionals reach out to me about questions on facts that which is a financial software company that I would use to work for and every time a customer call, they would have sent us a chat message, I would have to log information about what they asked, the resolution, etc. It really made sense and it really all came together in terms of having some of that day job group from my experience, interacting with customers, helping them, that their service offering, especially now with Slack to compliment it, is just an incredible opportunity. They talked about how they do ticketing, which was a huge headache for me previously to try to replace some of the contact center things. They have self-service chat box all integrated into one platform that I personally see increasingly being integrated on Slack. Then they had another point in terms of all the synergies that Slack brings to every single one of their business units and the one that I've been most excited about since the acquisition was Connect. I don't want to get too much into Slack because I know we'll jump in on that later, but there's one quote that specifically stood out to me. It was technology disruption from digital telephoning impacting contact centers to the proliferation of self-service and chat box and this is again going and harping on the Service Cloud. Just an incredible opportunity to make customer interactions easier and have better outcomes. A lot of the calls that I took in, they mentioned it too. A lot of customer service interactions are very easy resolutions, but they can become harder based on friction in the process. When you think about setting your password or adjust, figuring out how to find some information to the idea that there's Service Cloud can decrease the friction in terms of their interaction with our customers is just mutually beneficial as their customers will have faster resolution times, happier customers, and they'll be happier because of Salesforce. Just a lot of opportunities in terms of continuing in this growth and I think they now have five consecutive quarters of aggregate 20 percent growth or more for a company that has a run rate of, I think, about 26 billion expected in 2021. That is just incredible to me.

Clay Bruning owns shares of Salesforce.com. The Motley Fool owns shares of and recommends Salesforce.com. The Motley Fool has a disclosure policy.

Stocks Mentioned

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Salesforce
CRM
$131.11 (0.75%) $0.98

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