Salesforce (CRM) Stock Could Be 45% Undervalued As AI Expansion Spending Grows
Salesforce stock has fallen 36.2% over the past year, yet based on current checks the market price looks out of step with what various valuation tools imply about its underlying worth.
- Over the past 12 months, Salesforce shares have declined 36.2%, which puts recent pricing under clear pressure despite ongoing business activity in AI and cloud software.
- Heavy investment in agentic AI, including the planned US$1b spend in Switzerland, can support the long term earnings story. At the same time, concerns around slowing growth and mixed sentiment on Agentforce adoption remain a key risk for how much investors are willing to pay.
- On Simply Wall St’s broader checks, Salesforce screens as cheap in most areas, with a value score of 5 out of 6, and both the Discounted Cash Flow (DCF) intrinsic value estimate and market multiples currently pointing to an undervalued profile.
The stock's next move may depend on whether Salesforce’s current discount to intrinsic value proves justified or instead reflects overly cautious expectations priced into the shares.
Find out why Salesforce's -36.2% return over the last year is lagging behind its peers.
Does Salesforce Look Undervalued on Cash Flow?
The Discounted Cash Flow (DCF) model looks at the cash Salesforce is expected to generate for shareholders and discounts it back to today. On the latest figures, Salesforce is producing last twelve month free cash flow of about $14.5b, and the model assumes those cash flows keep growing rather than shrinking.
Under these assumptions, the DCF points to an estimated intrinsic value of about $299 per share. This sits above the current market price and implies the stock is 45.4% undervalued. The recent $1b commitment to agentic AI investment in Switzerland helps explain why some investors remain cautious, but it also aligns with the cash flow growth path embedded in this valuation.
Overall, the DCF workup suggests Salesforce stock currently screens as undervalued relative to its projected cash generation.
Our Discounted Cash Flow (DCF) analysis suggests Salesforce is undervalued by 45.4%. Track this in your watchlist or portfolio, or discover 44 more high quality undervalued stocks.
Does Salesforce Look Undervalued on Earnings?
P/E is a useful yardstick for Salesforce because the company is profitable and earnings are a key driver for how investors price large software platforms. Salesforce currently trades on a P/E of about 16.7x, which sits well below the broader Software industry average of 29.3x and the peer group average of 57.4x.
On Simply Wall St’s fair multiple framework, a P/E of around 31.5x would be more in line with Salesforce’s profile, given its size, margins and sector risks. Compared with today’s 16.7x, that suggests the stock is priced at a sizeable discount to what this tailored benchmark indicates, even after factoring in concerns around slowing growth and questions over Agentforce traction.
On P/E, Salesforce stock appears undervalued relative to both its industry and the fair multiple that investors might typically pay for this kind of business.
See what the numbers say about this price — find out in our valuation breakdown.
The Salesforce Narrative: What Would Justify Today's Price?
Simply Wall St Narratives for Salesforce take the valuation puzzle a step further by spelling out which future paths for Salesforce's growth, margins and earnings would make its stock worth materially more or less than today's price on the Community page. Where a single ratio or model gives one headline figure, these Narratives unpack the assumptions that figure rests on so you can watch how Salesforce's actual progress lines up with them over time.
The Salesforce community is split between those who see the current price as a discount on AI and automation momentum and those who think slower growth and tighter margins could still bite.
Bull case: 34% undervalued
"Salesforce's ongoing integration of AI and agent-based automation (Agentforce, Data Cloud) into its product suite is driving rapid adoption, evidenced by 40% of new agentic bookings coming from existing customers expanding usage, and triple-digit growth in Data Cloud and AI ARR; these trends suggest expanding average contract values and a pathway to structurally accelerated revenue growth..."
Read the full Bull Case to see why Salesforce could be undervalued
Bear case: roughly fairly valued
"Proliferation of AI-native and industry-specific competitors puts persistent downward pressure on Salesforce's pricing power and market share, leading to long-term commoditization of their SaaS offerings and a negative impact on both top-line revenue growth and average contract values..."
Read the full Bear Case to see why Salesforce could be overvalued
Do you think there's more to the story for Salesforce? Head over to our Community to see what others are saying!
The Bottom Line
For Salesforce, both the Discounted Cash Flow (DCF) intrinsic value estimate and the P/E based fair-value view indicate an undervalued stock, and the broader checks align with that message. The catch is that this gap only closes if Salesforce converts its AI and agentic investments into durable cash flow growth and maintains healthy margins. The key question from here is whether the current discount reflects an opportunity ahead of stronger execution, or whether it is the market correctly pricing the risks around slower growth and uncertainty over Agentforce adoption.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com