• Salesforce (CRM) is now selling for 2019 prices, despite being twice as large.
• The company took a double-hit as investments in other startups plunged in value.
• A reset in CRM stock now depends on whether its co-CEOs can find a better direction for the business.

The Covid-19 pandemic took Salesforce (NYSE:CRM) and its investors for a ride. Shares in the cloud-based database software company opened May 26 at about $160 each. That level was last seen in CRM stock in April 2020 as it recovered from the short-term hit from the pandemic’s start. Before that, it saw that price in November 2019.

When Salesforce first achieved its current price in fiscal 2019, it had revenue of $13 billion. Today, it has revenue of $26.5 billion for the year ending in January. In 2019, the company had net income of $1.1 billion. Today’s company has net income of $1.4 billion.

If you liked CRM stock then, you should love it now. Right?

The Ride in CRM Stock

Long-term investors seem bearish on Salesforce because the pandemic gave their investment some very good days. CRM stock breached $270 per share in August 2020 and hit an all-time high of nearly $312 per share last November.

Then it all went pear-shaped. The value of the stock has been cut in half since November. But it’s still not cheap. The market cap is $161 billion, 6 times last year’s revenue and more than 100 times last year’s net income. Rather than ask if it’s undervalued now, ask why it was overvalued then.

Salesforce was overvalued as a work-from-home play. It had just opened its new headquarters tower, San Francisco’s highest building, when the pandemic started. It’s still building more office spaces while saying it’s committed to “success from anywhere,” with most office desks occupied just 30% of the time.

This means employees are benefitting from lower costs for gas, clothes and lunch, but the company isn’t. Revenue grew 25% last year, but its selling, general and administrative (SG&A) expenses grew right alongside it by 22%. Salesforce even reported a loss of $28 million, or 3 cents per share, for the quarter ended in January.

Acquisitions and Investments at Salesforce

Salesforce has always been associated with co-founder and CEO Marc Benioff, but he handed off a co-CEO title last year to Bret Taylor. Now 42, Taylor joined Salesforce when it bought his Quip startup in 2016. But the Taylor era is on hold because of his side gig as chairman of the board at Twitter (NASDAQ:TWTR).

When I wrote about Taylor last year, Salesforce was integrating Slack into the company as part of his efforts to make its software more user-friendly. The aim of the deal was to let people create applications with little or no code. Salesforce paid $27.7 billion for the acquisition.

Since then, several investments the company has made have taken a hit. Two years ago, Benioff was crowing about Salesforce surpassing the value of his former employer, Oracle (NASDAQ:ORCL). Oracle is now worth 19% more than Salesforce at $192 billion.

Salesforce’s rise in 2020 was powered by its investments in other companies. This has also helped power its downfall. For example, it put $250 million into Snowflake (NASDAQ:SNOW) at its initial public offering (IPO), but sold as it plunged.

It has also been an investor in companies such as Robinhood (NASDAQ:HOOD) and Zoom (NASDAQ:ZM). Their losses have been magnified on its balance sheet.

The Bottom Line on CRM Stock

Benioff likes to note that he launched Salesforce in 2001 at the bottom of the last tech recession. Back then, just like today, tech investors saw a lot of the companies they had invested in disappear. But those who hung on prospered.

Salesforce now must reinvent itself. Talk of values isn’t nearly as important as talk of new applications. Automating the office doesn’t save money unless it’s replaced. The job of Salesforce should be automating the world, not just the people who work in it.

I made a mistake buying the dip on Salesforce and I lost money. It still has some value, and I might sell it for something better, unless both its co-CEOs refocus on the future of the business.

On the date of publication, Dana Blankenhorn held long positions in CRM. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.