If any company besides Amazon (NASDAQ:AMZN) exemplifies the value of early adoption and the “be right and sit tight” philosophy of investing, it’s Salesforce (NYSE:CRM) stock. Anyone who had the foresight to buy and hold CRM stock 15 years ago has been richly rewarded; today, prospective investors must consider whether hypergrowth by CRM stock is still likely or even possible.
I dare to declare that it’s both possible and likely. As the company’s ticker symbol implies, Salesforce is the undisputed heavyweight champion of CRM, or customer relationship management. CRM is a sector that will continue to expand as businesses embrace this subset of technology as a prerequisite of growth and even survival. Cloud technology in particular will drive Salesforce stock to new highs, not necessarily today or tomorrow, but inevitably at some point.
Own CRM Stock as a Cloud Play
Salesforce stock is by no means a pure-play, cloud-technology bet, and it’s certainly not the only cloud-related asset out there. Still, customer relationship management and cloud technology go hand-in-hand nowadays, and Salesforce’s early positioning in the cloud gave both the company and the owners of CRM stock a head start.
Salesforce’s website explains the cloud’s importance in today’s business environment better than I ever could:
“Cloud-based CRM systems… mean every user has the same information, all the time. Your sales teams out on the road can check data, update it instantly after a meeting, or work from anywhere. The same information is available to anyone who needs it, from the sales team to the customer service representatives.”
Cloud-based CRM also tends to be cheaper, faster, more portable, more adaptable to growth, more feature-rich, and just plain better than the alternatives. By bringing cloud technology to CRM, Salesforce took a subsector it was already dominating, transformed it, and retained its dominance.
Earning Trust in a Mistrustful World
Salesforce’s next hurdle is overcoming an obstacle it didn’t create. While Facebook (NASDAQ:FB) has gained notoriety for allegedly misusing people’s personal data, Salesforce has committed no such transgressions (as far as I know). Nonetheless, CRM must find ways to shake off any damage that it’s suffered as a result of Facebook’s issues.
That’s easier said than done, as Facebook’s breach of trust has cast a shadow on any company that stores users’ data. More than anything, clients and users want to see a proactive approach, not just a defensive stance, to addressing people’s privacy concerns (are you listening, Mark Zuckerberg?).
In that area, I feel that Salesforce has really performed well. Usually I like to focus on companies’ earnings and revenues, but today I’ll direct your attention to Salesforce’s third-quarter conference call, which featured multiple company representatives actively calling for policy reform. First, I’ll quote Amy Weaver, CRM’s president, Legal & Corporate Affairs, General Counsel and Secretary:
“[T]he CCPA, which is the California Consumer Privacy Act… is really an important step forward in the U.S. privacy landscape. But as I said before, we really believe that all Americans… deserve strong privacy protections and that is why we are continuing to advocate for a comprehensive federal privacy law.”
That sentiment was reiterated and elaborated upon by Salesforce Chairman and Co-CEO Marc Benioff:
“That’s also why I called for a U.S. national privacy law. We do not want to patchwork…like what we’ve seen in California. I think it’s extremely important. What has happened in California. I have worked with the team to get that done, but we don’t want to patchwork across the United States. We badly need a national privacy law.”
That, more than any earnings or revenue numbers, made an impression on me. I’m not expecting Salesforce to undo Facebook’s industry-wide PR damage, but it gives me that warm and fuzzy feeling to root for a company that exudes integrity. That quality pays extraordinary dividends in a decidedly trust-dependent field of endeavor.
The Bottom Line on CRM Stock
I’ve seen folks complaining lately that CRM stock has been stuck in a range for awhile, causing them to lose patience. I would encourage them to see past the short-term and stick with a company they can actually feel good about. As trust in Salesforce grows, CRM stock will also increase.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.
