Why Salesforce Stock Is Sinking Thursday After Earnings Topped Estimates
Key Takeaways
- Salesforce shares fell Thursday despite the software maker's first-quarter results beating estimates.
- Morgan Stanley analysts said the company faces a "building wall of worry" from investors concerned about macroeconomic headwinds.
- Some analysts also voiced concerns that Salesforce's AI offerings are still in the early days of customer adoption.
Salesforce (CRM) shares sank on Thursday despite the software giant's first-quarter results beating estimates, as analysts voiced concerns about macroeconomic headwinds and cautioned the company's AI offerings are still in the early stages of adoption.
Shares had climbed in extended trading Wednesday after the results were released, but plunged 5% to just over $261 in recent trading. The company lifted its full-year outlook, but Oppenheimer analysts noted the increase in revenue projections is largely due to the benefit of currency exchange rates.
"Negatively, the growth guidance remains tepid to reflect a tough macro environment," the analysts wrote, while maintaining their "outperform" rating and $370 price target. Most analysts are bullish on Salesforce, with 17 "buy" ratings compared to five "hold" and one "sell" rating among brokers tracked by Visible Alpha, with an average price target of $358.
Deutsche Bank analysts, with a "buy" rating and $400 price target, said management's comments around customer interest in Salesforce's AI-powered Agentforce offerings are a positive, while noting that "management enthusiasm and customer feedback continue to outpace the financial contribution."
Citi Analysts Still See Salesforce's Agentforce as a 'Show-Me Story'
Citi analysts said the results cleared a "low bar," and that Salesforce's Agentforce remains a "show-me story" that is progressing, but has not yet convinced them that it's "ready for prime-time."
Morgan Stanley analysts said the "the question of when will growth inflect higher" due to Agentforce adoption remains, and that despite solid results, the company faces a "building wall of worry" from investors concerned about macroeconomic headwinds impacting Salesforce.
Salesforce's Thursday move puts shares down nearly 22% since the start of the year.
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