Salesforce, the cloud software company is currently valued at 183 billion USD.
According to my estimates, Salesforce's intrinsic value is 190 billion USD.
In 2021 Salesforce made 26.5 billion USD in revenue.
Yes, cloud computing is growing briskly and in 7 years should be, according to many analysts' forecasts a 700 billion USD in revenue per year market.
But Salesforce's average net profit margin is around 5 % on average in the last 5 years. Furthermore, even with the cloud's huge potential, I personally do not see Salesforce justifying a Price/Sales ratio of more than 6 in the next 7 years.
Yes, cloud computing is the future, but as with every exciting new technology investors at large seem to be overestimating cloud computing's future growth rates.
What is more, as with every new technology there is always the danger that another newer technology will come up and annihilate the established high-tech.
Actually, Salesforce is building on its market capitalisation to buy new, exciting software companies like Slack, Tableu and Mulesoft. In the last dot-com boom several companies functioned like a technological Berkshire Hathaway, Warren Buffett's controlled conglomerate, which builds value by buying mature, profitable companies, integrating them, managing them well, using the dividends they distribute to buy other mature companies and thus prolonging a virtuous cycle.
The "trick" of Warren Buffett's Berkshire Hathaway is that all companies Berkshire buys are profitable, mature and dividends distributing. Warren Buffett, the Oracle of Omaha is a genius, accordingg to my humble opinion.
Salesforce and the companies it bought are mainly barely profitable ot loss making. The attempts of technology conglomerates to build value by buying up companies in the dot-com boom ended badly. Most of them went bankrupt loosing tens of billions of USD for their investors.
Salesforce, actually could survive, I think. Because the cloud makes all production, both physical and software manufacturing so much cheaper.
Thus value is enhanced. Globally.
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