Marc Benioff, co-leader of Salesforce.com Inc., speaks during a Bloomberg Television interview at the 2022 Dreamforce conference held in San Francisco, California, USA, on Thursday, Sept. 22, 2022. Benioff expressed his enthusiasm about data demonstrating a decline in San Francisco’s overall homeless populace. Photographer: David Odisho/Bloomberg via Getty Images
David Odisho | Bloomberg | Getty Images
Equities of Salesforce plummeted 18% Thursday morning, positioning the stock for its most challenging day since 2008.
The decline follows Salesforce reporting fiscal first-quarter outcomes that fell short of Wall Street’s predictions for revenue for the first time since 2006. It also delivered guidance that was below expectations.
The cloud software vendor disclosed that revenue for the period rose 11% to $9.13 billion, which was lower than the $9.17 billion anticipated by analysts, according to LSEG.
Salesforce anticipates second-quarter adjusted earnings per share of $2.34 to $2.36 on $9.2 billion to $9.25 billion in revenue. Analysts surveyed by LSEG projected $2.40 in adjusted earnings per share on $9.37 billion in revenue.
Citi analysts remarked that broader macroeconomic challenges “resurfaced forcefully” during Salesforce’s first quarter. They highlighted that the period also proved shaky for other software firms, but that execution challenges and modifications to Salesforce’s go-to-market approach also affected the company’s performance.
The analysts reduced their price target on the stock to $260 from $323.
“With decelerating growth, absence of de-risked estimates and increased M&A activity we are content to stay on the sidelines awaiting improved growth or more proof of Data Cloud/GenAI momentum/monetization,” the Citi analysts stated in a report Thursday.
Other firms adopted a more positive stance.
Goldman Sachs analysts reaffirmed their buy recommendation on the stock and stated they see Salesforce as a “high-quality software franchise.” They mentioned that the company will need to regain the trust of investors but added that they believe declining interest rates, the conclusion of the election cycle, and generative artificial intelligence will act as growth drivers.
Goldman Sachs analysts commented in a report Wednesday that Salesforce is “an under-appreciated Gen-AI victor.” They also noted the potential for “significant margin expansion to ensue,” the report mentioned.
Morgan Stanley analysts remarked that assessing Salesforce’s outcomes without feeling somewhat uncertain about its growth is challenging. Nonetheless, they anticipate the company will benefit from generative AI, particularly next year.
The analysts sustained their overweight rating on the stock.
“While the quarter was a letdown and probably diminishes investor confidence in a near-term growth revival, the data indicates impacts are more cyclical rather than structural,” they noted in a report Thursday.
— good’s Michael Bloom and Jordan Novet contributed to this report
