Salesforce shares tumble 19%, on pace for worst day since 2004

Marc Benioff, co-chief executive officer of Inc., speaks during a Bloomberg Television interview at the 2022 Dreamforce conference in San Francisco, California, US, on Thursday, Sept. 22, 2022. Benioff shared his excitement over data indicating a decrease in San Francisco’s total homeless population. Photographer: David Odisho/Bloomberg via Getty Images

David Odisho | Bloomberg | Getty Images

Shares of Salesforce tumbled 19% Thursday morning, putting the stock on pace for its worst day since 2004.

The drop comes after Salesforce on Wednesday reported fiscal first-quarter results that missed Wall Street’s estimates for revenue for the first time since 2006. It also gave lighter-than-expected guidance.

The cloud software vendor said revenue for the period increased 11% to $9.13 billion, which was shy of the $9.17 billion expected by analysts, according to LSEG.

Salesforce expects second-quarter adjusted earnings per share of $2.34 to $2.36 on $9.2 billion to $9.25 billion in revenue. Analysts surveyed by LSEG were expecting $2.40 in adjusted earnings per share on $9.37 billion in revenue.

Citi analysts said broader macroeconomic challenges “returned with a vengeance” during Salesforce’s first quarter. They noted that the period has also been weaker for other software companies, but that execution issues and changes to Salesforce’s go-to-market strategy also impacted the company’s performance.

The analysts lowered their price target on the stock to $260 from $323.

“With slowing growth, lack of de-risked estimates and more active M&A we are comfortable on the sidelines awaiting improving growth or more evidence of Data Cloud/GenAI momentum/monetization,” the Citi analysts wrote in a note Thursday.

Other firms took a more optimistic position.

Goldman Sachs analysts reiterated their buy rating on the stock and said they view Salesforce as a “high-quality software franchise.” They said that the company will need to win back confidence from investors but added that they believe easing interest rates, the end of the election cycle, and generative artificial intelligence will serve as growth catalysts.

Goldman Sachs analysts said in a note Wednesday that Salesforce is “an under-appreciated Gen-AI winner.” They also see room for “meaningful margin expansion to take place,” the note said.

Morgan Stanley analysts said it is hard to look at Salesforce’s results without having one’s confidence in its growth “somewhat shaken.” However, they believe the company will benefit from generative AI, particularly next year.

The analysts maintained their overweight rating on the stock.

“While the quarter was a disappointment and likely reduces investor conviction in a near-term rebound in growth, the evidence suggests impacts are more cyclical than secular,” they wrote in a note Thursday.

— CNBC’s Michael Bloom and Jordan Novet contributed to this report

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