Salesforce: Sticky SaaS, Massive Moat, & Microsoft-Level Potential

About this video

• Video Title: Salesforce: Sticky SaaS, Massive Moat, & Microsoft-Level Potential
• Channel: Dividend Compounders with Cheese
• Speakers: Amos
• Duration: 00:30:16

Overview

In this video, Amos analyzes Salesforce (CRM) to determine whether to sell his shares or continue investing. He examines the company's recent performance, calculates its intrinsic value using discounted cash flow and EPS analysis, discusses its historical trading multiples, and explores its competitive advantages, including its sticky SaaS model, market share, and AI integration with products like Agentforce. He also addresses concerns about stock-based compensation and compares Salesforce's potential to that of Microsoft.

Key takeaways

• Recent Performance: Salesforce reported strong Q2 2026 results with 9% year-over-year revenue growth and increased guidance, despite a generally bearish Wall Street sentiment.
• Valuation Analysis:
  • Discounted Cash Flow (DCF) model suggests a fair value of $335 per share with a conservative 10% free cash flow growth assumption.
  • Earnings Per Share (EPS) analysis, using a PE ratio of 34 for 2026, indicates a potential price of $356 per share.
• Historical Valuation: Salesforce's current forward trading multiple of 20.6 is significantly lower than its historical average (91.6 over 20 years, 152 over 5 years), suggesting it may be undervalued.
• Compounder Status: Over the past 20 years, Salesforce has generated a total return of 4,130%, resulting in a CAGR of 20.5%, classifying it as a "certified compounder."
• Competitive Moat: Salesforce possesses a "sticky" SaaS model, dominates the CRM market with 20-21% share, and is innovating with AI offerings like Agentforce, which integrates AI into customer service and sales processes.
• Growth Strategy: The company utilizes mergers and acquisitions (e.g., Tableau, Slack) to fuel growth, similar to companies like Procter & Gamble.
• Financial Health: Salesforce has strong cash reserves ($15.3 billion) and is increasing its free cash flow, which counteracts concerns about significant stock-based compensation ($3.22 billion). The company also has an authorized $20 billion for share buybacks.
• Dividend: Salesforce pays a small but growing dividend (currently 41 cents per quarter) with a healthy payout ratio of 24.1%.
• Future Potential: The speaker sees Salesforce as having Microsoft-level potential, creating an indispensable ecosystem for businesses, and even suggests it could acquire The Trade Desk.
• Personal Investment Plan: The speaker plans to "double down" and continue dollar-cost averaging into Salesforce, believing it is currently undervalued and a bargain.