Salesforce, the cloud-based software giant, has captured the attention of Wall Street with its recent stock performance and strategic advancements in artificial intelligence. In early December, Salesforce stock reached an unprecedented high of $369, drawing significant interest from major financial institutions. Bank of America and Needham have both expressed favorable views on Salesforce's potential for further gains, largely due to its innovative AI product offerings.
Salesforce's journey to becoming a top pick for 2025 among Wall Street firms is driven by its strategic focus on AI technology. In the latter half of 2024, Salesforce launched Agentforce, a product that allows businesses to customize AI bots for enhanced customer service capabilities. This innovative solution has positioned Salesforce as a leader in the burgeoning Agentic AI market, a sentiment echoed by Bank of America. Needham has been particularly impressed by Salesforce's sales derived from its AI products, setting a price target of $400 for the stock, which is approximately $75 above its current level.
Agentforce has already demonstrated significant impact, with Salesforce reporting 200 paid deals in the third quarter alone. The company anticipates reaching 1,000 deals by the end of last year. During a third-quarter earnings call, CEO Marc Benioff highlighted the effectiveness of Agentforce, noting its ability to resolve 83% of customer queries. This focus on AI innovation has been a critical factor in Needham's optimistic outlook for Salesforce.
The broader US software sector has been on an upward trajectory, rallying 59% in 2023 and 23% in 2024. Analysts at Bank of America acknowledge that the sector is not inexpensive but believe that growth expectations remain below historical medians.
"The US software sector is not inexpensive after rallying 59% in 2023 and 23% in 2024," said Bank of America analysts.
Despite these valuations, Bank of America analysts see untapped potential in the sector.
"However, revenue multiples and growth expectations remain below [five]-year median and pre-covid levels, indicating that upside from the unfolding Agentic AI wave, inflecting enterprise IT spending and sustained migration to the cloud is unlikely to be fully priced in," they stated.
Salesforce's upward momentum is not a recent phenomenon. Since December 2022, the company's stock has been on a consistent uptrend. This trajectory aligns with a broader recovery in the market, as evidenced by the Dow Jones Industrial Average's rise by half a percentage point in late afternoon trading on Tuesday.
The strategic focus on artificial intelligence has been instrumental in Salesforce's recent success. Bank of America is closely monitoring software companies like Salesforce that stand to benefit from AI product advancements. Likewise, Needham's bullish perspective hinges on Salesforce's ability to execute and monetize its Agentforce strategy.
"Our bullish thesis is highly leveraged to CRM's ability to execute and monetize its new Agentforce strategy," stated Needham.