Salesforce Stock Takes a Hit After Q1 Earnings and Lowered Forecasts

In a recent development in the stock market, Salesforce Inc (CRM) observed a significant drop in its stock price on Thursday. This downward trend followed the company's disclosure of its first-quarter earnings, which not only fell short of analyst expectations but also came coupled with a less-than-optimistic outlook for the upcoming quarter. As a domino effect, several analysts have proceeded to revise their price targets for the company downward, after digesting the newly released financial details.

Q1 Earnings Overview

Salesforce reported a Q1 revenue of $9.13 billion, narrowly missing the estimated mark of $9.147 billion. This was the company's first sales miss in over ten years but still represented an 11% year-over-year increase. The organization showcased stronger performance in other financial aspects, with a 39% boost in year-over-year cash flow from operations, reaching $6.25 billion, and free cash flow rising by 43% to hit $6.08 billion. Additionally, Salesforce ended the quarter with remaining performance obligations of $26.4 billion, marking a 10% increase from the previous year.

CEO Marc Benioff highlighted the potential of artificial intelligence in revolutionizing customer engagement, positioning Salesforce at the forefront of this impending AI-driven transformation in customer relationship management (CRM).

Weaker Second-Quarter Forecasts

The outlook for the second quarter put forward by Salesforce indicates anticipated revenues in the corridor of $9.2 billion to $9.25 billion, which is slightly below the expectations of $9.34 billion set by market analysts. Also, their adjusted earnings forecast for the second quarter stands at $2.34 to $2.36 per share, trailing behind the analysts' projection of $2.40 per share. Looking further ahead, the company has set its full-year 2025 revenue goal to be between $37.7 billion and $38 billion, contrary to the analysts' forecast of $37.98 billion, but foresees adjusted earnings surpassing the estimated $9.76 per share with its projection of $9.86 to $9.94 per share.

Analysts' Reactions

Post-earnings, analyst sentiment has seen a shift, with price target adjustments reflecting a more cautious stance on Salesforce's stock:

• Piper Sandler cut its price target from $300 to $250 but maintained a Neutral rating.
• Baird downgraded its price target from $355 to $295 while sustaining an Outperform rating.
• Morgan Stanley altered its price target from $350 to $320 yet maintained an Overweight rating.
• Needham confirmed its Buy rating and retained a price target of $345.

Following these events, Salesforce's share prices experienced a substantial decline of 16.7%, trading at $226.18.

Salesforce, Stock, Earnings