Cheap valuation+limited AI risk, Xiaomo raised the FTSE (CRM.US) rating to “increase wealth”

The Zhitong Finance App learned that J.P. Morgan upgraded its CRM.US (CRM.US) rating from “unrated” to “increased” on the grounds that its valuation is attractive and the risks associated with artificial intelligence (AI) are limited. The bank also set a target price of $250 for December 2027.

A team of analysts led by Samik Chatterjee said, “The reason we are optimistic about the company is that in the short term, the core business is expected to accelerate growth in the second half of fiscal year 2027 (ending January 2027); furthermore, we believe that the impact that the adoption of cutting-edge artificial intelligence models and changes in the competitive landscape may have on their business should be limited to a small portion of the business. At the same time, the current valuation appears to be undervalued because the share price has taken into account expectations of a further slowdown in growth and deterioration in fundamentals, rather than progress under the FY2030 'Rule 50' framework set by the company.”

The so-called “50 rule” generally refers to the financial benchmark for technology and software companies — that is, the sum of the year-on-year revenue growth rate plus profit margin or free cash flow profit margin must reach or exceed 50%.

Analysts believe that the main driving force for the rise in stock prices from current levels will be valuation revaluation, the magnitude and timing of which will depend on the acceleration of revenue growth. However, even if the revenue growth rate does not increase, there is still room for the stock price to rise based on the current level of undervaluation. Analysts emphasized that although SAFTSE's stock price is currently undervalued, its revenue growth rate is close to double digits, leading profit margins, and it has established a leading position in the enterprise customer relationship management (CRM) market.

SAFTSE closed up 4.16% to $201.37 on Thursday, but it still has a cumulative decline of 24% since this year.

According to media reports, private equity giant Yinhu Capital is in talks to acquire human resources software manufacturer Workday (WDAY.US). The news drove Workday to rise by 30% at one point and drive AI application software stocks such as SAFTSE to strengthen collectively. Workday's potential deal will be an important weather vane for testing private equity's interest in traditional software assets in the context of AI reshaping the industry.

Overall, Wall Street analysts gave FTSE a “moderate buy” rating, with an average target price of $238.83, which is 18.6% higher than the current stock price.