How to Invest in Salesforce

What Salesforce is

Customer relationship management, which defines business interactions with customers, is a relatively new process that became popular in the late 1990s. Salesforce (CRM 7.54%), is only 25 years old but has already used it to emerge as the third-largest enterprise software company in the world. Here we'll look at how Salesforce became one of the largest cloud-based computing businesses in the world. You'll learn how to invest in Salesforce and about its prospects as a long-term investment.

Investing in Salesforce

Investing in Salesforce

Salesforce, a San Francisco–based enterprise software company, was a red-hot investment for the first two decades of its existence. The company’s growth was fueled by a string of acquisitions, capped by its $27.7 billion purchase of Slack in 2021.

Since its 2004 initial public offering (IPO), Salesforce stock has risen steadily, with very few setbacks. If you’d spent $10,000 on shares when the company went public and held them today, your investment now would be worth about $1 million.

Research firm Gartner (IT 1.25%) estimates that Salesforce controlled 22.1% of the global cloud-based consumer relationship management market in 2023, more than the combined market share of competitors Microsoft (MSFT 0.11%), Oracle (ORCL 0.09%), SAP (SAP 1.22%), and Adobe (ADBE -0.25%).

The cloud-based giant leveraged its customer relationship management strength and successes to begin locking customers into Salesforce’s expanded offerings in the commerce, marketing, analytics, and data visualization markets. But a combination of factors -- reduced software spending, growing competition, and activist investors -- has slowed growth for most of its cloud platforms, which include software for sales, service, platform and other, marketing and commerce, and integration and analytics.

The headwinds mean the company expects revenue growth between 8% and 9% in the 2025 fiscal year; analysts expect revenue growth to increase at a compound annual growth rate (CAGR) of 10% through the 2027 fiscal year, less than the estimated rate for the global customer relationship management market. Salesforce has responded by laying off thousands of workers and channeling free cash flow into its first buyback plan and dividend to please activist investors.

How to buy

How to buy Salesforce stock

Anyone can become a shareholder of Salesforce. The memory and storage solutions company trades on the Nasdaq Stock Exchange under the stock ticker CRM, so you can buy the stock in any brokerage account.

You'll need to take a few steps before becoming a Salesforce investor. This four-step guide will show you how to invest in Salesforce stock and add the technology company to your portfolio.

Step 1: Open a brokerage account

You'll want to open and fund a brokerage account before buying shares of any company. If you need to open one, here are some of the best-rated brokers and trading platforms. Take your time to research the brokers to find the best one for you.

Step 2: Figure out your budget

Before making your first trade, you'll need to determine a budget for how much money you want to invest. You'll then want to figure out how to allocate that money. The Motley Fool's investing philosophy recommends building a diversified portfolio of 25 or more stocks you plan to hold for at least five years.

You don't have to buy all those stocks at once. You can ease into investing by taking one step at a time. A good way to start is with around 10 stocks. So if you have $1,000 to invest right now, you want to budget about $100 for each stock.

Step 3: Do your research

It's essential to thoroughly research a company before buying its shares. You should learn about its competitors, its balance sheet, how it makes money, and other factors to make sure you have a solid grasp on whether the company can grow value for its shareholders over the long term. Continue reading to learn more about some crucial factors to consider before investing in Salesforce stock.

Step 4: Place an order

Once you've opened and funded a brokerage account, set your investing budget, and researched the stock, it's time to buy shares. The process is relatively straightforward. Go to your brokerage account's order page and fill out all the relevant information, including:

• The number of shares you want to buy or the amount you want to invest to purchase fractional shares.
• The stock ticker (CRM for Salesforce).
• Whether you want to place a limit order or a market order. (The Motley Fool recommends using a market order since it guarantees you buy shares immediately at market price.)

Here's a screenshot of how to buy a stock with the five-star-rated platform Fidelity (which offers a video tutorial and a step-by-step guide):

Once you complete the order page, click to submit your trade and become a Salesforce shareholder.

Should you buy?

Should you invest in Salesforce?

Whether you should invest in Salesforce or not is a fair question. After all, if you’d bought $10,000 in Salesforce stock when its IPO hit the markets at $2.75 per split-adjusted share, you’d now be sitting on a $1 million nest egg.

But past performance is no guarantee of future results, and investing in a particular stock is an extremely personal decision that depends on factors such as your time horizon, risk tolerance, portfolio composition, and beliefs about the future of any particular industry or company.

You may want to consider investing in Salesforce if:

• You want to invest in a company that’s tied to a long-term secular trend like cloud computing.
• Your company uses Salesforce products, and you believe they’re superior to other offerings.
• You believe the company will take advantage of artificial intelligence (AI) innovations to help customers automate processes, make faster decisions, and provide superior customer service.
• You think the company’s slowdown in revenue growth was a COVID-19 pandemic–related hiccup and that it now has a handle on expenses.
• You’re encouraged as an investor by the company’s plans to pump the brakes on its mergers and acquisitions spree.
• You understand that Salesforce isn’t likely to continue growing as quickly as it has over the past two decades.
• You think Salesforce stock can outperform the S&P 500 over the long term.
• You’re a fan of founder-led companies and believe that Marc Benioff can continue to steer Salesforce in the right direction.

Here are a few reasons you might want to pass on buying Salesforce stock:

• You don’t understand exactly what Salesforce software does, or you doubt that its products add much value.
• You’re not sure that the cloud computing market will continue to grow steadily.
• You believe AI is overhyped or likely to damage the economy.
• You think Salesforce competitors are gaining ground and will soon surpass its market share.
• You’re looking for more substantial and reliable dividend income.
• You think Salesforce’s acquisitions have overextended the company.
• You have doubts about the company’s ability to match or even approach its earlier rapid growth.

Is it profitable?

Is Salesforce profitable?

Salesforce might not be posting profits as large as the ones reported earlier in its existence, but it’s still important to note that it’s a profitable company. It recorded almost $35 billion in revenue for the 2024 fiscal year, an 11% increase -- healthy by most standards, but short of the 20% returns investors routinely enjoyed over the last decade.

Given that profit drives stock prices, the company’s latest returns should indicate that the company will continue to grow, even if its boom years are over. Investors should also keep in mind that even though Salesforce is a giant, it’s not immune to the recent headwinds faced by the cloud computing industry.

When considering profitability, investors also should keep in mind that the company has slowed its acquisitions spree, which had acted as a drag on net income. Meanwhile, it’s increased its free cash flow, and operating margins have improved dramatically.

As of mid-2024, Salesforce stock traded for about 28 times its trailing-12-month free-cash flow,, which indicates that it’s reasonably priced. If the company can continue reporting annual profits that increase in the low to midteens, it’s likely to remain a solid long-term holding.

Does it pay a dividend?

Does Salesforce pay a dividend?

Blue chip companies generate a fair amount of cash, and investors generally expect some of that extra cash to be returned to them in the form of profits. Salesforce very recently became the latest member of the Dow Jones Industrial Average (DJIA) to declare a dividend.

The company announced a $0.40-per-share quarterly dividend in February, paid on April 11 to shareholders of record as of March 14. Although the company’s annual dividend yield amounts to a paltry 0.58% (the S&P 500 dividend yield is around 1.4%), the change may have helped appease activist investors who were pushing for significant changes.

ETFs with exposure

ETFs with exposure to Salesforce

Not everyone wants to be an active stock picker and manage a portfolio of individual stocks. Thanks to exchange-traded funds (ETFs), you don't have to be an active investor. These passive investment vehicles allow you to gain some exposure to a company through a thematic approach or broader market strategy.

As of mid-2024, 349 ETFs reported holdings of Salesforce stock. The largest was the Vanguard Total Stock Market ETF (VTI 0.77%), which held about 29 million shares worth $7.63 billion, about 0.52% of its total assets under management. It was trailed by the Vanguard 500 Index Fund (VOO 0.87%), which had $6.25 billion in Salesforce stock, about 0.64% of the fund’s total holdings.

Funds with larger exposure to Salesforce included the iShares Expanded Tech-Software Sector ETF (NYSE:IGV), with 8.25% of its holdings invested in the cloud-based company, worth about $693 million. The REX FANG & Innovation Equity Premium Income ETF (NYSEMKT:FEPI) had 6.3% of its holdings tied up in Salesforce stock, but the amount was much smaller, with a market value of only $5.4 million.

Will Salesforce stock split?

Will Salesforce stock split?

Trying to predict a stock split for a particular company is always tricky. Splits depend on a number of variables that make their timing extremely hard to predict. Although plans for a split haven't been announced, it’s fairly safe to assume that Salesforce stock will split in the not-too-distant future, for the following reasons:

• The company’s first (and only) split occurred more than a decade ago, when it announced a 4-for-1 split in April 2013.
• Since the 2013 split, its share price has risen 625%, compounding annually at 19.8% -- more than triple the Dow Jones return over the same period.
• The company’s shares were trading for roughly $275 in mid-2024. The last time it split, its shares were selling in the mid-$40 range. One of the primary reasons for a split is to make shares more accessible to retail investors by lowering the price of individual shares.

So will Salesforce split its stock? Almost certainly. When will Salesforce split its stock? Who knows?

The bottom line

The bottom line on Salesforce stock

The COVID-19 pandemic was brutal for many stocks, even those focused on cloud computing. Salesforce shares fell 48% in 2022 before rebounding almost 60% last year. The increase is likely far from a dead-cat bounce, but it’s also not a sign that the company is going to reestablish the rocketlike growth trajectory of its earlier years. Investors who believe the San Francisco-based customer relationship management giant will be able to leverage AI and stay ahead of its competitors should consider the stock as a long-term, buy-and-hold proposition that’s likely to have its ups and downs as its market continues to evolve.