These companies aren’t going anywhere soon, and their stock prices seem rather appealing right now.
Investors are starting to see artificial intelligence (AI) as more of a mixed bag than a cure-all for boosting industry returns. Lately, software stocks have taken quite a hit—fairly broadly, too—as analysts adjust their growth projections due to worries that AI might diminish the need for various applications. With future earnings growth feeling a bit unclear, investors are willing to pay less for software stocks.
That said, this decline might actually present a significant opportunity for patient, long-term investors. Both stocks are noted for their solid competitive stances, and analysts suggest they have a 100% upside based on Wall Street’s average price target.
Here’s the scoop—Intuit and Salesforce are seen as worthwhile purchases at this point.
Intuit: Median price target indicates 100% upside potential
Intuit is perhaps best recognized for its TurboTax and QuickBooks software. It’s also the owner of Credit Karma, a service that tracks credit and promotes new loan options, as well as Mailchimp, which assists with email marketing.
Management anticipates a revenue boost of 14% to 15% this year due to an emphasis on developing its online ecosystem. This ecosystem is designed to mesh Intuit’s various services, making it easier to cross-sell to small and medium-sized businesses. For instance, a QuickBooks user might opt for a package that combines TurboTax for handling year-end taxes. Last quarter, online ecosystem revenue made up 80% of Intuit’s operating segments, experiencing a 21% year-over-year growth.
This strategic expansion is likely to fortify Intuit’s competitive advantage. Switching costs for small businesses tend to be quite high. Many owners focus more on scaling their operations rather than seeking out cheaper or better alternatives for things like bookkeeping, tax documentation, and email marketing.
While Intuit’s retention rate for its SaaS offerings might seem low, it’s more reflective of small businesses’ high failure rates rather than any shortfall in service quality. In fact, small businesses that use QuickBooks often exhibit a higher success rate than average.
Key data points
Current price: $380.55 (change: -0.26%)
Market capitalization: $106 billion
Intuit is also tying together its popular brands like TurboTax and Credit Karma to further boost customer retention and revenue. Moreover, TurboTax continues to thrive despite the government’s push for free alternatives, indicating a strong customer willingness to invest in its comprehensive features for tax filing.
Wall Street has set a median price target of $800, while the stock is currently priced around $400 after its recent downturn. Some analysts are reevaluating the earnings multiples assigned to Intuit, but at 17 times forward earnings, the stock seems too enticing to pass up. The company is growing revenue in the mid-teens range and is expected to see even robust growth as it expands its online offerings.
Salesforce: Median price target points to 72% upside
Salesforce supplies various business solutions in the realm of cloud software-as-a-service (SaaS), covering aspects from sales to customer service and marketing. Its integrated service suite has allowed it to maintain significant net revenue retention and consistent growth.
This framework also helps facilitate AI initiatives. In late 2023, Salesforce introduced Agentforce, which utilizes proprietary corporate data from its Data Cloud to carry out complex tasks throughout the Salesforce suite. The annual recurring revenue for Agentforce surged 330% year-over-year, reaching $540 million in the last quarter. Though this is just a fraction of Salesforce’s total business, it’s a significant strategic component.
With Agentforce deeply integrated into the Salesforce ecosystem, it could substantially boost customer spending on subscriptions. Clients will not only invest in Agentforce and Data 360 services, but they also need to pay for Salesforce’s major software package.
Key data points
Current price: $185.16 (change: -0.07%)
Market capitalization: $174 billion
During its analyst day last fall, management unveiled strategies to not only rekindle revenue growth but also enhance margins. If the company can reach its long-term goal of being classified as a “Rule of 50” (where operating margin and sales growth both exceed 50), it stands to be worth significantly more in the future. This suggests revenue could increase by around 50% in the coming years while operating margins broaden considerably.
Wall Street holds a median price target of $325 per share, but the stock currently hovers around $190. This reflects a potential 72% increase in its value. Given that it trades at only 14.5 times forward P/E, investor expectations appear lower than management’s long-term projections discussed during last fall’s investor day. Even if management’s outlook on Agentforce is slightly optimistic, the stock remains attractive considering how embedded Salesforce’s solutions are within enterprises.
