Salesforce's TTM free cash flow is about 14.66B. Management guided FY2027 free cash flow growth to 4%-5%. The balance sheet adjustment is -$19.67B, calculated as cash, marketable securities, and strategic investments minus debt, including the new debt from the $25B debt-funded share repurchase.
Using a simple DCF:
* Starting FCF: 14.66B
* 5-year growth: 5%
* Terminal growth: 2.5%
* Discount rate: 10%
* Balance sheet adjustment: -19.67B
* Shares outstanding: 819M
That gives an estimated equity value of about 203B or 248/share. With $CRM trading around 150/share, the stock is trading at roughly 61% of the computed intrinsic value.
Salesforce also has a few things going for it:
Management authorized a major buyback program, suggesting they believe the stock is undervalued.
Q1 FY2027 revenue grew 13% year over year to $11.1B, while subscription and support revenue grew 14%. Free cash flow growth outlook was lowered largely to reflect debt service expense from the 25B debt-funded buyback.
Salesforce is becoming a player in the AI space. Agentforce ARR reached $1.2B in Q1 FY2027, up 205% year over year.