Salesforce (CRM) stock plunged more than 20% in early trading Thursday, easily making it the worst Dow Jones stock of the day. The slide comes after the software-as-a-service (SaaS) provider came up short of revenue expectations for its fiscal first quarter and issued a soft outlook for the second quarter.
In the three months ended April 30, Salesforce's revenue was up 11% year-over-year to $9.13 billion and its earnings per share (EPS) increased 44.4% to $2.44.
"Our profitable growth trajectory continues to drive strong cash flow generation," Salesforce CEO Marc Benioff said in a statement. "We are at the beginning of a massive opportunity for our customers to connect with their customers in a whole new way with AI. As the world's #1 AI [artificial intelligence] CRM, we're incredibly well positioned to help companies realize the promise of AI over the next decade."
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The results were mixed compared with analysts' expectations. According to CNBC, Wall Street was anticipating revenue of $9.17 billion and earnings of $2.38 per share.
For the second quarter, Salesforce said it expects revenue in the range of $9.2 billion to $9.25 billion and EPS to land between $2.34 to $2.36. The guidance is lower than the $9.4 billion in revenue and $2.40 per share in earnings Wall Street is expecting.
This is due in part to "ongoing headwinds from professional services," said Amy Weaver, chief financial officer of Salesforce, in the company's earnings call, amid "deal compression and customers delaying or slowing projects."
For the full year, Salesforce maintained its revenue guidance of $37.7 billion to $38 billion and raised its EPS guidance to a range of $9.86 to $9.94 from $9.68 to $9.76. Analysts are expecting revenue of $38.1 billion and earnings of $9.76 per share.
Is Salesforce stock a buy, sell or hold?
The tech stock has struggled so far in 2024, and was up a modest 3% year to date through the May 29 close. Still, analysts are upbeat towards CRM stock. According to S&P Global Market Intelligence, the consensus analyst target price for the blue chip stock is $306.51, representing implied upside of over 41% to current levels. Meanwhile, the consensus recommendation is a Buy.
Needham is one of the more bullish firms on CRM stock with a Buy rating and $345 price target. However, in a note released this morning, analyst Scott Berg said "investors may hesitate" after the weak first-quarter results.
"Salesforce reported a surprising revenue miss in Q1 compared to the guided midpoint as macro dynamics hit bookings, and an EPS beat largely due to lower than expected other income and taxes," Berg wrote in a note to clients. "Guidance was unchanged at the top line, signaling management's confidence in their ability to execute after the miss."
Berg's $345 price target implies upside of nearly 60% to current levels.
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