Is Salesforce a Falling Knife Or Is The Worst Over?
Salesforce's AI business is growing at triple-digit rates, yet the stock keeps sliding on fears that a chatbot could replace it. Bulls and bears read the same earnings very differently, and the next two quarters will decide who is right.
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Salesforce (NYSE:CRM | CRM Price Prediction) trades at $213.70. The stock is down 18.78% this year even as its AI business scales quickly, which makes the falling knife question worth answering now.
Salesforce runs the world’s largest CRM platform and is rebuilding itself around Agentforce, Data 360, Slack, MuleSoft, Tableau and Informatica. Shares have been dragged down by the “SaaSpocalypse” story. Jim Cramer summed up the fear on Mad Money: “people feared that something like Claude would obviate Salesforce entirely.” The stock now sits below its $239.50 50-day average but above its $198.22 200-day average.
Agentforce Growth at 14x Forward Earnings Looks Mispriced
A forward P/E of 14 and a free cash flow yield of 8.19% appeal to bulls, especially for a company whose Agentforce and Data 360 ARR reached about $3.9 billion, up 210%. Agentforce alone exceeded $1.5 billion, up 240%. Current RPO growth accelerated to 14% from 13%, and net new AOV growth was the strongest in four years.
Management raised fiscal 2027 revenue guidance to $46.1 billion to $46.4 billion. The $25 billion accelerated buyback cut diluted shares to 821 million from 962 million.
Strip Out One-Time Gains and the Growth Story Shrinks
Bears note that Q2’s $5.90 non-GAAP EPS included $2.53 per share from investment gains. Operating income was flat year over year, and the guidance raise leaned on $200 million from pending Contentful and Fin deals. Noncurrent debt jumped to $39.3 billion from $10.4 billion. Free cash flow growth is guided to only 4% to 5%. The same SaaS-versus-AI tension lies at the heart of a free handbook we wrote on riding a mania without giving back the gains.
Even the CEO admits the pricing model is a work in progress: “We’re still trapped in some ways in old per-user pricing models.”
Second-Half Reacceleration Remains Unproven
Management promised “second half organic revenue reacceleration,” and the third quarter is the first real test. Guidance calls for revenue of $11.42 billion to $11.5 billion, EPS of $3.42 to $3.44 and current RPO growth near 14%. Closing acquisitions will cloud the organic picture. That clarity will also depend on premium edition upgrades, which so far reach just 5% of sales and service users.
Analysts See 34% Upside While Shares Lag the Market
The average analyst target of $287.08 means about 34.3% upside from $213.70 across 56 analysts. Targets are estimates that can change. The breakdown:
- Strong Buy: 6
- Buy: 34
- Hold: 15
- Sell: 0
- Strong Sell: 1
Salesforce is down 18.78% for the year, and the S&P 500 is up 7.83%. Over the past week, shares fell 6.77% against a 2.7% drop for the index. The trailing P/E is 20 and the 52-week range is $146.06 to $267.80.
Why Salesforce Cash Flow Could Outpace the Fear
At $213.70, the bull case rests on execution.
The path higher runs through the next two quarterly reports. If organic growth picks up and current RPO holds near 14%, the AI replacement story loses force. At that point a forward P/E of 14 looks too low for a business with a 77.68% gross margin.
The buyback offers a reference point. Salesforce bought back shares at an average of $176, so management put capital to work close to current levels. Agentforce adoption is also spreading, with 50% of Agentforce bookings coming from customers buying more credits.
The thesis falls apart if current RPO growth slips below guidance, if organic growth stalls once acquisitions are removed or if Agentforce ARR growth fades sharply. A break below the 200-day average would signal that the falling knife reading was right.
Salesforce at 14 times forward earnings prices in AI-driven decline while the business keeps posting AI-driven growth.
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Alex Sirois is a financial writer with experience spanning both retail and institutional investing. He has written for InvestorPlace and held roles at BNY Mellon and Bernstein, giving him a perspective that bridges Main Street portfolios and Wall Street analysis.
Alex holds an MBA from George Washington University and has built his career across multiple industries, including e-commerce, education, and translation — a breadth of experience that informs how he breaks down complex financial topics for everyday investors. His writing is conversational, actionable, and grounded in long-term, buy-and-hold investing principles.
At 247 Wall St., Alex focuses on delivering analysis that is both accessible and useful, with a clear emphasis on helping readers make more informed decisions with their money.
