June 1, 2023 – Salesforce Inc (CRM.N) experienced a 7% drop in shares on Thursday following the release of its quarterly revenue report, which revealed the slowest growth rate for the company since 2010. The decline in revenue growth is attributed to businesses cutting back on spending for cloud-based software offerings.
The enterprise software maker’s market value is expected to decrease by nearly $14 billion, with its share price at $208.40. Despite the setback, Salesforce has seen a 69% increase in its stock this year as of last close, making it the fourth-highest gainer in the S&P 500 index.
Salesforce reported its smallest quarterly revenue increase in 13 years on Wednesday, attributing the slowdown to an uncertain U.S. economy, as well as decreased demand from financial services and tech companies. The economic challenges faced by businesses, including high inflation and interest rates, have impacted tech spending this year, affecting growth for major cloud service providers like Amazon.com Inc (AMZN.O).
Brokerage firm Bernstein noted that although management has pointed to macroeconomic factors, the subscription nature of Salesforce’s business indicates that a dramatic turnaround in revenue numbers is unlikely.
Analysts remain mostly positive on Salesforce, citing potential benefits from the company’s push towards artificial intelligence (AI) and improved profitability. The company’s recent financial report showed a net income of $199 million, up from $28 million the previous year, with operating margin increasing to 5.0% from 0.3%.
Following the earnings report, at least 25 brokerages raised their price targets on Salesforce stock, resulting in a median view of $240—7% higher than its last closing price, according to Refinitiv data.
D.A. Davidson analysts believe that Salesforce is well-positioned to “develop, deliver, and monetize AI,” thanks to its existing data offerings through Tableau and its ability to integrate AI into existing company tech stacks.
