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Salesforce (NYSE:CRM) fell nearly 7% on Thursday as the cloud-computing software company lowered its full-year revenue forecast, due in part to foreign exchange headwinds and a longer deal cycle, something Wall analysts may be concerned about Street. be the “first shoe to drop” in a broader downturn.
Wedbush analyst Dan Ives, who has an outperform rating on Salesforce ( CRM ) but lowered his price target to $215 from $225 following the results, said “all focus” is on fiscal guidance 2023.
“Front office software will obviously see some demand hits around the edges given the macro and [Salesforce’s] Street guidance will be reviewed as possibly the first shoe to drop in a broader slowdown in the software world over the next 6 to 9 months due to macro,” Ives wrote, while adding that he believes the guidance cut is likely to be “more yet a moderate reset.”
Speaking on a conference call, Salesforce ( CRM ) co-Chief Executive Marc Benioff said the company lowered its full-year revenue outlook to between $30.9B and $31B, from an earlier forecast of $31.7B to $31.8 B. About $250M was due to foreign exchange headwinds, but there was also some prolongation of deal closings, largely due to uncertainty in the US economy.
Citi analyst Tyler Radke, who has a neutral rating on Salesforce ( CRM ) but lowered his price target to $179 from $189, said the deals shouldn’t come as a surprise, given recent results of ServiceNow (NOW).
“The said, the [Salesforce] The path to recovery looks more uncertain, with growth indexed in front office spending facing tough comps and with sensitivity to discretionary budgets and seat-based pricing,” Radke wrote in a note to clients.
Radke added that although the company is “right” to prioritize margin expansion, this sudden discipline could weigh on growth and recovery, especially with Salesforce ( CRM ) expected to have “anemic” growth of operating costs and slowing growth.
For its third quarter, Salesforce ( CRM ) said it expects to earn between $1.20 and $1.21 per share, on revenue in the range of $7.82B to $7.83B. That forecast calls for sales growth of about 14% in the third quarter of 2021.
Hedge fund Appaloosa, founded by billionaire investor David Tepper, recently disclosed that it took a new position in Salesforce (CRM) in the second quarter, while making several other changes to its portfolio.