Tech stocks are often good buys, consistent players in even volatile times, but many of the biggest names – think Apple (NASDAQ:AAPL) , Alphabet (NASDAQ:GOOG), or Microsoft (NASDAQ:MSFT) – can be too expensive for the average investor. Luckily, the tech sector is large and diverse enough that there are plenty of smaller stocks that might be good options. So, how can you choose?
Looking at recent reporting, including top hedge fund listings, one standout, but comparatively affordable option is Salesforce (NYSE:CRM). Salesforce has been an increasingly popular pick with hedge funds since late in FY15. That’s not the only indicator that Salesforce is one to watch, though.
Pixabay/Public Domain
Strong Acquisitions
Another reason to keep an eye on Salesforce right now, and to move fast before it takes off, is because the company made a strong acquisition this summer, buying the business messaging company Slack. Slack was already a business of interest, though not publicly traded, and the purchase was timely. Taking into consideration the ongoing COVID-19 pandemic, the need for remote communications remains strong. And, with Salesforce a top native platform, taking on Slack could mean the chat platform sees its own improvements, with more extensive business integrations.
Native Launches
One reason that Salesforce has consistently been popular with businesses, including major corporations, is that it’s a leader in interoperability. The company not only makes countless native tools that merge smoothly with the Salesforce platform, but it also connects with a wide variety of other SaaS platforms.
Recently, the company launched its new native business accounting and finance platform, FinancialForce, further strengthening the brand and contributing to strong earnings.
Impressive Cash Flow
Compared to many other companies, Salesforce has carried out a fairly acquisitions-heavy strategy, and the approach makes sense given the brand’s emphasis on interoperability. That being said, extensive acquisitions can make a dent in available cash – but it hasn’t impacted profit-heavy Salesforce. The company predicts a 14-15% operating margin, recently raised from 12-13% for FY22, and its free cash flow for Q1 and Q2 of FY21 was a remarkable $3.23 billion, up 75% year-over-year, minus acquisition expenses.
In addition to its own comparative earnings data, it’s worth noting that overall Salesforce has seen growth closely mirroring the S&P 500 since the start of 2021. Excluding after-hours changes, Salesforce has seen 17% growth, compared to 20% for the entire index. That’s a strong indicator that this stock is going in the right direction.
When Salesforce was launched over 20 years ago, it defined its field in many ways, a reality made clear by the fact that the company boasts the ticker symbol CRM. At this point, though, Salesforce is much more than a CRM business and a critical tool for countless industries.
From small business owners navigating some of their first online sales to major corporations, Salesforce boasts an impressive roster of clients. As it continues to expand and redefine itself against new market demands, it will likely see continued growth. The sooner you buy, the more likely you are to benefit from the business’s wide-ranging native portfolio and savvy acquisitions strategy.
