Technology
Thursday, May 30th, 2024 4:20 pm EDT
Key Points
- Salesforce Stock Drop: Shares of Salesforce fell 20%, marking its worst trading day since 2004, following disappointing fiscal first-quarter results and underwhelming future guidance.
- Financial Performance and Guidance: Salesforce reported a revenue increase to $9.13 billion, missing the expected $9.17 billion, and provided lower-than-expected second-quarter earnings and revenue guidance.
- Analyst Reactions: Analysts were divided, with Citi lowering their price target and expressing caution due to macroeconomic challenges and execution issues, while Goldman Sachs and Morgan Stanley maintained a more optimistic outlook, citing potential growth from generative AI and other factors.
Shares of Salesforce plummeted by 20% on Thursday morning, marking its worst trading day since July 4, 2004, when shares dropped 27% shortly after the company’s IPO. This decline followed Salesforce’s fiscal first-quarter earnings report on Wednesday, which fell short of Wall Street’s revenue expectations for the first time since 2006, coupled with underwhelming guidance for the future.
The cloud software giant reported a revenue increase of 11% to $9.13 billion for the quarter, missing the analyst forecast of $9.17 billion, as per LSEG. For the second quarter, Salesforce projected adjusted earnings per share between $2.34 and $2.36 on revenues ranging from $9.2 billion to $9.25 billion, below the expected $2.40 EPS and $9.37 billion revenue anticipated by analysts.
Citi analysts attributed the disappointing performance to broader macroeconomic challenges that intensified during Salesforce’s first quarter, compounded by internal execution issues and strategic adjustments. Consequently, they lowered their price target for Salesforce from $323 to $260. Despite these challenges, Citi analysts expressed a cautious stance, preferring to wait for signs of improved growth or evidence of successful monetization of new initiatives like Data Cloud and generative AI.
Conversely, other firms maintained a more favorable outlook on Salesforce. Goldman Sachs reaffirmed its buy rating, emphasizing Salesforce’s status as a high-quality software enterprise. They acknowledged the need for the company to regain investor trust but were optimistic that factors like easing interest rates, the conclusion of the election cycle, and advancements in generative AI would drive growth. Goldman Sachs highlighted Salesforce as a significant potential winner in the generative AI space and anticipated substantial margin expansion.
Similarly, Morgan Stanley analysts, despite acknowledging the recent results’ impact on confidence, maintained an overweight rating on Salesforce. They pointed out that the setbacks appeared more cyclical rather than indicative of a long-term decline. They also projected that generative AI would be a key growth driver for Salesforce, particularly in the upcoming year.
In summary, while Salesforce faces immediate challenges reflected in its stock’s steep decline and missed revenue targets, some analysts remain confident in the company’s long-term prospects, especially with potential boosts from generative AI and other strategic initiatives. The contrasting viewpoints highlight a divided sentiment on Wall Street regarding Salesforce’s near-term recovery versus its long-term growth potential.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/05/30/salesforce-stock-fall-earnings-revenue-miss.html
