3 Reasons Salesforce.com Stock Could Rise

It's been an incredible decade for Salesforce.com (NYSE: CRM). Shares of the cloud-software titan are up a staggering 1,600% during this time, fueled by the torrid growth of the customer relationship management software market, intelligent acquisitions, and the rapid acceleration of cloud-based computing.

With the stock up more than 35% so far in 2018, Salesforce is on pace for another outstanding year. Here are three reasons why the good times are likely to continue for investors.

Long runways for growth still ahead

Salesforce expects its revenue to grow 25% to $13 billion in fiscal 2019. While impressive, this figure amounts to only a small fraction of the $391 billion that businesses are projected to spend on enterprise software this year. Moreover, enterprise software spending will grow to more than $537 billion by 2021, according to respected IT research firm Gartner. This gives Salesforce ample opportunity for growth, as it's well-positioned to capture a far larger share of this enormous market in the coming years.

Salesforce is the leader in cloud-based customer relationship management software -- the largest and fastest-growing segment of the global enterprise market. The company continues to enjoy strong demand for its growing suite of cloud-based software solutions.

Its remaining performance obligation, which represents future revenue that's under contract but not yet recognized, surged 36% to $21 billion in the second quarter. In turn, co-CEO Keith Block said that Salesforce is "well on our way to our next milestone of $23 billion in revenue" in fiscal 2022.

If the company can reach its goal -- and all signs suggest it will -- it would represent a near doubling of Salesforce's trailing-12-month revenue. This type of growth is almost unheard of for a company worth $100 billion or more, making Salesforce a unique -- and highly attractive -- investment opportunity among large-cap growth stocks.

MuleSoft was a brilliant acquisition

Despite the company's aggressive revenue targets, it's possible that investors still are underestimating Salesforce's future growth potential. That's because its new data-integration offerings -- which are powered by its recent $6.5 billion acquisition, MuleSoft -- have been met with "nearly universal euphoria," according to management.

"As more and more companies connect everything and everyone, they're realizing that integration is vital to their success and to their digital transformation, and now they're turning to Salesforce MuleSoft, the number one integration cloud, to do it," Block said during the company's second-quarter conference call.

The increasingly important need to tie together data from disparate sources -- such as private data centers, public clouds such as Amazon Web Services and Microsoft Azure, and a host of other data providers -- is driving businesses to Salesforce in search of its best-in-class data-integration solutions. As such, MuleSoft provides Salesforce with a powerful competitive advantage over its rivals, as well as a strong -- and likely still underappreciated -- new growth driver.

AI-fueled gains

In addition to integration, Salesforce is benefiting from rising demand for artificial intelligence (AI)-powered software solutions. "Automation and AI are in every conversation because every company wants the more predictive, smarter, personalized experience for their customers," Salesforce President Bret Taylor said during the call.

Salesforce has wisely placed artificial intelligence at the core of its platform. The company long ago recognized the ability of machine learning to glean useful insights from all kinds of data. Since that time, the company has moved aggressively to build out its own internal AI capabilities and augment them with acquired technologies. In turn, Salesforce's Einstein platform now offers some of the most advanced AI technology among enterprise application providers.

"Customers, no matter what industry, no matter what geography, no matter what size company, want insights," Block said. Einstein helps to supply this intelligence by delivering more than 3 billion predictions and AI-based insights to Salesforce customers every day.

The popular service is helping Salesforce win new business and strengthen its relationships with existing customers, both of which should help it capture a larger share of the massive enterprise software market -- and deliver even more gains to its investors -- in the years ahead.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon and Salesforce.com. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.