Equity valuation

: Salesforce

Abstract

This thesis employs a hybrid valuation methodology, integrating Discounted Cash Flow (DCF) and relative valuation, to evaluate the financial performance of Salesforce, Inc. The analysis identifies several key strengths of Salesforce, including a robust gross margin of 75.5%, a projected long-term growth rate of 16.2%, and a well-established position within the SaaS market. In the wake of Donald Trump's election, technology stocks witnessed a notable surge in valuation multiples, suggesting the possibility of further expansion. However, the intensifying competitive landscape underscores the necessity for strategic execution to sustain growth. The target price of $306.4 reflects the intrinsic and market-based potential of Salesforce. Sensitivity analyses and scenario modeling, including optimistic projections based on AI strategies, demonstrate the variability in valuation outcomes. Nevertheless, the attainment of projected growth is contingent upon Salesforce's capacity to effectively leverage AI and maintain its leadership position in the face of intensifying competition. This research issues a "hold" recommendation, as the current valuation is in close alignment with the target price, indicating limited short-term potential for growth. While Salesforce provides a stable foundation for long-term growth, its success is contingent upon the consistent execution of strategic initiatives in a dynamic market. The findings contribute to the equity valuation literature, emphasizing the importance of aligning market optimism with intrinsic performance, particularly in the rapidly evolving technology sector.

Date of Award	4 Feb 2025
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	José Carlos Tudela Martins (Supervisor)