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Salesforce (NYSE:CRM) sharing down more than 8% early Thursday when the cloud-computing software company lowered its full-year revenue forecast, due in part to foreign exchange headwinds and a longer deal cycle.
And some Wall Street analysts worry that Salesforce’s (CRM) view may be the “first shoe to drop” in the broader downturn.
Wedbush analyst Dan Ives, who has an outperform rating on Salesforce ( CRM ), lowered his price target on the company’s stock to $215 per share from $225 following the results, noting that “all focus” is in the Salesforce (CRM) 2023 guide.
“Front office software will obviously see some demand hits around the edges given the macro [environment]” in software over the next 6 to 9 months. Ives added that he believes the guidance cut is likely to be “more than a modest 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 per share from $189, said the deals should not come as a surprise, given the recent results of ServiceNow (NOW).
However, Radke said, “The [Salesforce] the recovery path looks more uncertain, with growth indexed in front office spending facing tough comps and with sensitivity to discretionary budgets and seat-based pricing.”
Radke added that although the company “deserves” 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, excluding one-time items, 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.