Why Hedge Funds Are Bullish on Salesforce Inc (CRM)

Salesforce Inc (CRM) has been a darling of hedge funds, with 116 of them holding shares of the company as of Q3 2024. The tech giant's strong financial performance, strategic acquisitions, and innovation in AI and machine learning have all contributed to its appeal. Let's delve into the reasons behind the hedge funds' bullish stance on CRM.



1. Strong Financial Performance: Salesforce has consistently shown strong financial performance, with a three-year median payout ratio of 14%. This indicates that the company retains a higher percentage (86%) of its profits for reinvestment, leading to significant earnings growth. Additionally, Salesforce's earnings are expected to continue growing, albeit at a slower pace according to current analyst estimates.
2. Strategic Acquisitions: Salesforce's strategic acquisitions have expanded its offerings and strengthened its position in the market. For instance, the acquisition of Slack for $27.7 billion has enhanced Salesforce's Customer 360 platform and rewritten the future of enterprise software. The acquisition of Tableau in 2019 brought self-service analytics and data visualization to the Salesforce ecosystem, expanding its AI and reporting capabilities.
3. Innovation in AI and Machine Learning: Salesforce's infusion of AI and machine learning into its software applications, such as Einstein AI, has positioned the company to capitalize on the growing demand for AI-driven solutions. The rise of AI and ML in SaaS products offers Salesforce an avenue to strengthen its position, as highlighted by Montaka Global Investments, an investment management company.
4. SaaS Adoption: The growing demand for SaaS solutions, driven by trends such as scalability, cost-efficiency, and accessibility, aligns directly with Salesforce's offerings. This increased demand trends for SaaS solutions align directly with Salesforce's offerings, mainly its Customer 360 platform and CRM software.
5. Cloud Migration and Digital Transformations: The ongoing cloud migrations and digital transformations of enterprises create opportunities for Salesforce to expand its customer base and revenue. This trend, as highlighted by Montaka Global Investments, contributes to Salesforce's growth potential and appeal to hedge funds.



In conclusion, Salesforce's strong financial performance, strategic acquisitions, innovation in AI and machine learning, SaaS adoption, and opportunities from cloud migration and digital transformations have all contributed to its appeal to hedge funds. With 116 hedge funds holding shares of CRM as of Q3 2024, it's clear that the investment community is bullish on Salesforce's growth potential and long-term prospects.