Recently, I discussed how valuation is not as big of a concern as it seems at first glance with Salesforce (NYSE:CRM) stock.

However, I will admit that a rich price-to-earnings ratio is not the only concern investors may have about CRM stock right now.

At least, based upon a recent development that could be initially regarded as a red flag. I’m talking about recent insider selling, by both the company’s CEO Marc Benioff and by other C-suite executives at this leading customer relationship management company.

Insider buying is a bullish sign. With this, it’s easy to conclude that insider selling is a bearish sign. However, that’s not always the case. The situation with Salesforce and the latest insider selling is one such example.

Let’s take a closer look and see why this news cannot change the story with shares.

CRM Stock and Last Month’s Insider Transactions

Check out headlines about Salesforce stock, and you’ll quickly see the headlines regarding insider selling that I am referencing above.

Per Seeking Alpha, Marc Benioff, along with COO Brian Millham and co-founder/CTO Parker Harris, have all reduced their respective positions in the company over the past month.

Pull up all of the recent insider transactions with CRM stock, and you’ll see that even more C-suite selling has been going on. You’ll also see that, while some executives have exercised options, no insiders have been making open market purchases of shares lately.

Yet despite all the red (selling) you are seeing, you still shouldn’t view this as a red flag. Namely, because even as there have been many selling transactions, the dollar amount of these transactions is miniscule relative to Salesforce’s $194.4 billion market cap.

Benioff’s selling has barely made a dent in his personal stake in the company. Benioff may be taking some risk off the table by selling 550,000 shares in total last month, but he continues to own 25.37 million shares.

The Salesforce CEO’s stake continues to represent a hefty portion of his overall net worth ($7.7 billion).

Why Shares Will Likely Get Back on Track

Insiders may buy for one reason, but insider selling happens for a variety of reasons. Whether because of a desire to diversify one’s wealth, or for estate planning purposes, it’s shortsighted to assume that such selling is already a case of “take the money and run.”

Of course, it may be hard to dismiss this insider selling, while it happens at the same time that CRM stock is pulling back.

Still, while shares are in a slump right now, that doesn’t mean underwhelming performance will continue indefinitely. When it comes to its chances of getting back on track over a long time frame, the odds that shares get back on track are in your favor.

Why? Remember when I said Salesforce stock isn’t as pricey as it seems on the surface? As the tech sector slump eases, the company’s earnings will bounce back significantly, from 21 cents per share last fiscal year (ending Jan. 2023) to $8.02 per share this fiscal year (ending Jan. 2024).

This means shares have a forward valuation of around 24.9, a sustainable multiple. Better yet, shares have more room to run considering the latest earnings forecasts.

The Verdict

In the fiscal years ahead, the sell-side expects earnings to keep growing, at around 17% annually. A continued rebound in tech spending, plus the rise of generative AI, point to this happening.

Speaking of generative AI, let me reiterate how much Salesforce is capitalizing on this trend. Because of this factor, not only is delivering results in line with forecasts attainable; delivering results ahead of these expectations may be within the realm of possibility.

Having said all of this, keep in mind that, while a rebound is likely, it may take time to happen. Misperceptions about both valuation and insider selling could keep weighing on shares. The prospect of interest rates staying high for much of 2024 may also affect near-term performance.

Nevertheless, feel free to consider CRM stock a solid big tech name to include in your portfolio.

CRM stock earns a B rating in Portfolio Grader.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.