NewsSalesforce
May 31, 2024 12:10 PM EDT
Salesforce experienced its worst trading day in over 20 years, with shares plummeting by 20%. This decline is the largest since July 4, 2004, when the stock dropped by 27% shortly after the company went public.
The disappointing performance follows Salesforce's announcement of fiscal first-quarter earnings, which fell short of Wall Street's sales projections for the first time since 2006. Sales for the quarter increased by 11% to $9.13 billion, missing analysts' expectations of $9.17 billion.
Despite these challenges, analysts at Goldman Sachs maintain a positive outlook on Salesforce, viewing it as a "high-quality software franchise" with potential for growth driven by factors such as easing interest rates, the end of the election cycle, and generative artificial intelligence. Similarly, Morgan Stanley analysts believe that generative AI will aid the company's recovery, maintaining an overweight rating on the stock.
The stock had its worst day in over 20 years on Thursday, when Salesforce's shares finished 20% down. July 4, 2004, the day the stock plunged 27% only days after the business went public, is the worst trading day in company history.
The decline follows Salesforce's announcement on Wednesday of fiscal first-quarter earnings, which, for the first time since 2006, failed to meet Wall Street's sales projections. It provided less guidance than anticipated as well.
According to LSEG, the cloud software provider said that sales for the quarter rose 11% to $9.13 billion, falling short of the $9.17 billion experts had predicted.
Salesforce projects adjusted earnings per share for the second quarter of between $2.34 and $2.36 on revenue of between $9.2 billion and $9.25 billion. In response to $9.37 billion in revenue, analysts polled by LSEG predicted adjusted earnings per share of $2.40.
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During Salesforce's first quarter, according to Citi analysts, larger macroeconomic difficulties "returned with a vengeance." They pointed out that other software businesses had also seen a decline during this time, but Salesforce's performance was also harmed by changes to its go-to-market strategy and problems with execution.
The stock's price objective was dropped by the analysts from $323 to $260. Some businesses adopted a more upbeat stance.
Although the company will need to regain the trust of investors, Goldman Sachs analysts noted that they continue to view Salesforce as a "high-quality software franchise" and that easing interest rates, the end of the election cycle, and generative artificial intelligence will serve as growth catalysts.
Salesforce is "an underappreciated Gen-AI winner," according to a note published by Goldman Sachs analysts on Wednesday. The paper also said that there is potential for "meaningful margin expansion to take place."
Although it is difficult to look at Salesforce's results without feeling "somewhat shaken" about the business's development, Morgan Stanley analysts think generative AI will help the company, especially in the next year. The stock was still rated as overweight by the experts.
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