Salesforce Raises Prices: 3 Reasons Its Stock Price Will Follow

Key Points

• Salesforce is raising prices; its stock price will follow as growth accelerates later this year.
• Cash flow and capital returns are solid, resulting in a significant reduction of the share count and providing leverage for shareholders.
• Analysts' revisions point to a 30% upside from mid-June price points.

Salesforce NYSE: CRM raised its prices, and its share price will soon follow for three reasons that begin and end with its pricing decision. The decision may appear to be bad news, impairing the company’s appeal to its consumers, but it aligns with technology industry trends and will ultimately accelerate its growth.

The increase, worth an average of 6% across select platforms, unifies and simplifies the pricing structure for medium- and large-sized businesses, the driving force behind tech spending. Platforms affected include the latest, next-generation, AI-focused services, such as Sales Cloud, Service Cloud, Field Service, and some industry-specific clouds. 

Cross-selling and up-selling opportunities were also affected by the increases. The company’s AgentForce and AgentForce 1 editions are available as add-ons and extensions of the core products.

Agentforce 1 is of particular interest, as it expands the company’s reach into the CRM-adjacent vertical of human resources management (HRM). The HRM industry is expected to grow at a 15% compound annual growth rate (CAGR) through the decade’s end, driven by the adoption and expanding use of AI and cloud-based services. 

1. Salesforce Had Momentum Before It Raised Prices: Momentum to Accelerate

Salesforce's FQ1 results were good, revealing momentum in the core businesses. Highlights include top- and bottom-line strength, as well as improved guidance calling for sequential acceleration, which is likely to be accelerated again in the back half of the year. The price hikes are set to take effect in August and will impact Q3 results as new clients subscribe to services and existing ones expand their usage. 

Other details of interest to investors, revealing accelerating business momentum, include a 12% increase in current RPO, 430 basis points hotter than the Q1 revenue growth, a 120% year-over-year (YOY) increase in Data Cloud and AI revenue, and the scale of new deals. New deals are centered in larger businesses, with the majority including six or more clouds. 

And the guidance was good. Not only is the company expecting strength to continue, but it has also improved its outlook (excluding the impact of price hikes), issuing a Q2 forecast above MarketBeat’s consensus forecast. Add in the effects of price hikes, and the Q3 and Q4 guides are likely to be robust.

Assuming these trends remain in force through the year’s end, the acceleration in Q3 and Q4 could be substantial. 

2. Salesforce Cash Flow and Capital Return: A Force to Be Reckoned With

Salesforce’s business generates significant amounts of cash and profits, allowing it to return capital to shareholders.

The capital return is also significant, including a token dividend and substantial share repurchases.

The share repurchases reduced the count by an average of 1.5% in FQ1 2025 and are expected to remain solid, if not increasing over time.

The outlook for earnings growth includes a 10% CAGR running through the middle of the next decade, aligning with the expectation of accelerating capital returns.

The dividend is a token amount yielding only 0.6%. Still, it is a safe and reliable distribution, accounting for 15% of the earnings, and it is also expected to increase over time.

3. Analysts' Revisions Set CRM Stock Up to Rebound Robustly 

The analysts' response to the Q1 news was mixed, including sufficient price target reductions to land the name on the list of Most Downgraded Stocks. However, the price target reductions are offset by a greater number of price target increases and the narrowing range, which is centered on the consensus.

The consensus estimate is for this Moderate Buy-rated stock to advance by 30% from its mid-June price points, and there is a catalyst to drive the stock's movement: business momentum and price hikes. The company is likely to outperform its guidance and the consensus of analysts for Q2 and issue solid guidance for Q3 and the year, a bullish catalyst for market sentiment.