The firm’s looking to raise $25bn in debt to use for share buybacks while its stock’s down. It’s really bold, but is it a brilliant or desperate move?

Software as a service

The stock market’s concerned about artificial intelligence (AI) agents undermining software companies, and Salesforce is one of the biggest potential casualties. 

There are a few ways in which this might happen. The most direct is that customers might just build their own AI agents that don’t need the firm’s user interface.

Even if customers do stick with the company, subscriptions are currently based on the number of users. But this could be set to fall substantially if AI agents replace humans in a big way.

Salesforce is looking to shift its pricing model, but that means lower recurring revenues. And the stock market’s taking that very badly, which is why the share price is falling. 

Debt and buybacks

A company buying back shares when its stock is cheap can be a really good move. It brings down the number of shares outstanding, which helps increase earnings per share.

Doing this with debt though, is hugely risky. The associated borrowing costs mean the company needs to generate enough cash to offset this for the move to work. 

Salesforce’s credit rating was downgraded by Moody’s after the announcement. So the firm could be looking at something like 4.5% in interest on the debt it’s taking on. 

At a price-to-earnings (P/E) ratio of 25, the company’s going to have to grow its earnings for the move to work. If it doesn’t, the consequences could be dire for investors. 

Charter Communications

Another S&P 500 company that’s used debt for share buybacks in recent years is Charter Communications (NASDAQ: CHTR). But that hasn’t worked at all well for investors.

Over the last five years, the firm’s earnings per share have increased by 46% despite net income growing by a much, much lower percentage. That’s the effect of share buybacks in action. 

Unfortunately though, the firm’s debt is up 60%. And while this was cheap when interest rates were low, Charter’s now having to refinance these at higher costs. 

That’s why the stock’s down 64% in the last five years. But the question is whether Salesforce betting big on itself is going to mean it ends up in a similar position.

All-in investing

Charter’s biggest problem is that its core cable TV business has been in decline. And buying back shares hasn’t done anything to change that. 

Could Salesforce be in a similar position? The company’s growth has been slowing recently, but it’s not really the same kind of outright declines – at least, not yet. 

If the company can fend off the AI threat, the move to buy in its own stock is will turn out to be a brilliant one. But if it can’t, the debt could be disastrous. Which is why I’m looking elsewhere.

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The comeback king

The first is The Trade Desk (NASDAQ:TTD). The stock’s down a whopping 71% over the past year, but analysts are predicting a comeback.

For example, at a current price of $35, the average 12-month target price from analysts is $59. There are a dozen with a target price of $70 or higher, reflecting a 100% move from the current price. The highest is from BMO Capital Markets, with a call at $98, and the lowest is from Wedbush at $40.

Let’s address the share price fall first. It’s not really due to a single issue, and it’s important to note the company’s still growing. However, the pace of growth has slowed, prompting some investors to adjust their expectations. Further, it’s facing tougher competition from big tech firms that have deeper pockets to try to grab market share.This remains a risk going forward.

Finally, I’d argue the stock was overvalued in the past, and this adjustment’s healthy in making it a much fairer valuation.

Looking ahead, I think the company could do well as its sector’s growing rapidly. In short, it helps advertisers buy ads across the internet. It’s well-positioned in key areas, such as ads on streaming platforms, which are lucrative right now.

At a broader level, I’ve read that some expect the US economy to outperform this year. If that’s the case, advertising spend should increase, as it’s a very cyclical sector.

Chartering the course

Another idea is Charter Communications (NASDAQ:CHTR). Over the past year, the stock’s down 45%. The telecoms company has struggled due to intensifying competition from fibre builders and 5G providers. This has eroded its pricing power, with reports showing unexpected losses in high-margin broadband subscribers.

In terms of price targets, certain brokers are predicting as high as $450, while other major contributors, including Citi, target over $300. Given that the stock currently trades at $190, there’s potential for serious gains if the forecasts prove accurate. The lowest target I can see is $180 from Morgan Stanley.

Of course, no one has a crystal ball. The brokers and analysts are well-informed, but they can still make mistakes when forecasting a company’s performance.

One key reason being flagged as to why the stock could outperform is that it has heavily invested in upgrading its network. As of 2026, peak capital spending has passed. This should translate to better free cash flow, which can support dividends or debt reduction.

Overall, I think both companies are worth considering for investors as potential turnaround plays for the year ahead.

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