Why management software pro Salesforce is collapsing on Wall Street

(BFM Bourse) – The customer relations software specialist delivered both revenues and outlook below expectations.

Publications from large companies on Wall Street have become rarer in recent days, with most of the results season having passed. Among the few heavyweights of the American stock market to communicate this week was Salesforce (260 billion dollars in market capitalization), which revealed its accounts on Wednesday evening.

The specialist in customer relationship management (CRM) software missed its meeting with the market, collapsing at the start of the session on Wall Street by more than 20%, which wiped out tens of billions of dollars of capitalization stock market. According to Bloomberg, this is the biggest drop in the stock since the summer of 2008.

In the first quarter of its 2024-2025 financial year, from February 1 to April 30, the group recorded an 11% growth in revenues to $9.13 billion while its earnings per share reached $2.44. However, the Bloomberg consensus stood at $9.15 billion for its revenues and $2.38 for earnings per share.

>> Access our exclusive graphic analyses, and gain insight into the Trading Portfolio

Disappointing outlook

Current remaining performance obligations (“CRPO”), a measure of sales contracted by the company and in progress, increased by 10%.

This figure constitutes a disappointment, according to Bank of America, because the company had indicated that it expected an increase of 12% on this indicator. “Like other application services companies this quarter, the weakening of the purchasing environment observed throughout the first quarter is at the origin of this situation,” judges the American establishment.

The company also delivered a disappointing outlook for the second quarter, anticipating growth of 7% to 8%, or revenues ranging from $9.2 billion to $9.25 billion, and an increase of 9% for CRPO. Bloomberg points out that the group’s growth would then be less than 10% for the first time in nearly 20 years. Analysts were counting on $9.35 billion for this quarter, according to the agency.

“Salesforce is being overtaken by a difficult macroeconomy,” summarizes Bank of America, which however confirmed its purchase advice, reducing its target to 288 dollars against 360 dollars previously.

“We recognize that visibility into the improving software spending environment is limited at this stage. However, some evidence suggests that second-quarter growth may be the bottom of the wave,” explains the American bank.

The poor results from Salesforce can also explain the slight tension on the “tech” stocks of the CAC 40 this Thursday. Shortly before the Paris close, Capgemini, which implements Salesforce solutions (among others) among its clients, lost 4.1% and Dassault Systèmes dropped 1.5%.

Julien Marion – ©2024 BFM Bourse

Source link -84