We recently published a list of 10 Trending AI Stocks to Watch in September. Since Salesforce Inc (NYSE:CRM) ranks 7th on the list, it deserves a deeper look.
Sam Stovall, chief investment strategist at CFRA Research, said while talking to CNBC in a latest program that since 1990, the market on average gains about 18% between the last rate hike and the first rate cut. However, during the 30 days after the first rate cut, the market historically “tread water,” gaining less than “one half of one percent.”
“Most of the action is below surface however, in the sectors, areas where a lot of the leaders be in the defensive areas but I have to add technology in there because investors don’t want to be giving up on the growth,” Stovall said.
Stovall pointed to another important historical data point regarding election years. He said that usually August and September are slow months in the stock market, but during election years the trend shifts to September and October, with markets historically rebounding in November and December once the uncertainty around the election subsides. The analyst recommended investors to position for a post-election rally which he believes buoys growth stocks.
For this article, we chose the top 10 AI stocks currently on investors’ radar following important news, earnings and analyst ratings. With each stock, we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Salesforce Inc (NYSE:CRM)
Number of Hedge Fund Investors: 117
Wedbush analyst Dan Ives has yet again reiterated his claim that the AI boom represents the fourth industrial revolution and the AI party is just getting started.
“While we recognize the bumpy macro/job data and the drumroll for the US Presidential elections into November, we view this sell-off in tech stocks as a buying opportunity for our core winners in this AI Revolution,” said Wedbush analysts, led by Daniel Ives, said in a note.
Salesforce Inc (NYSE:CRM) is one of the top stocks Ives believes can benefit from the AI wave.
“While investors may fret about this massive spending wave and frustrated that top-line growth/margins from these investments could take time to materialize, this ultimately speaks to our view this is a 1995 (almost 1996) start of the Internet Moment, and not a 1999 Tech Bubble-like moment despite bears getting louder during some of these head for the elevators tech sell-offs,” Ives added.
Salesforce Inc (NYSE:CRM) is trending after beating second-quarter estimates and raising its full-year profit guidance to $10.03 to $10.11 per share from $9.86 to $9.94 per share.
In the second quarter, Salesforce’s revenue rose 8% year over year while gross profits jumped 10%.
Salesforce Inc (NYSE:CRM) is also on investors’ radar because of its acquisitions. The company recently agreed to acquire AI voice agent firm Tenyx. This acquisition follows Salesforce’s strategic partnership with Workday to develop an AI-powered assistant for employees. The company has also agreed to buy SaaS data protection startup Own for $1.9 billion in cash.
Wall Street expects $11.12 per share in profits for Salesforce Inc (NYSE:CRM) next year, representing a 10% year-over-year increase. For the current financial year, profits are expected to grow by 23%, with estimates trending upwards. Based on these forecasts, Salesforce trades at a forward price-to-earnings ratio of 22, which is attractive given the AI-related growth catalysts.
Ithaka US Growth Strategy stated the following regarding Salesforce, Inc. (NYSE:CRM) in its Q2 2024 investor letter:
“Salesforce, Inc. (NYSE:CRM) is the largest pure-play cloud software company, holding a leading market share in customer relationship management applications and a top-five market share position in the company’s other clouds (Marketing, Service, Platform, Analytics, Integration, and Commerce). The company’s software subscription term-license model differs from the traditional perpetual-license software model in two respects: (1) the software is hosted on centralized servers and delivered over the internet, as opposed to traditional enterprise software that is loaded directly onto customers’ hard drives or servers; and (2) the revenue model is subscription-based, typically charging monthly fees per user as opposed to charging one-time licensing fees. The stock’s weak relative performance followed its fiscal first quarter earnings announcement, where the company missed top-line and cRPO (current remaining performance obligations) estimates while also issuing weak forward guidance.”
Overall, Salesforce Inc (NYSE:CRM) ranks 7th on Insider Monkey’s list titled 10 Trending AI Stocks to Watch in September. While we acknowledge the potential of Salesforce Inc (NYSE:CRM), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CRM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.