00:00 Brian Sozzi
Salesforce co-founder and CEO Marc Benioff’s closer ties to the Trump administration have not helped stem the ongoing slide in tech giant stocks. This can get really ugly for your CRM. Salesforce stock has fallen about 10% since the beginning of the year, as fears that things like Open AI’s Chat GPT could devastate software companies continue to sour investor sentiment. The stock is the worst performing stock in the Dow Jones Industrial Average. This followed a year in which stocks took a big breath and fell far behind Magnitude 7. Starboard Value activist investor Jeff Smith, who rose through the ranks at Salesforce last year, told me at Yahoo Finance Investments that he’s sticking to his guns.
00:54 jeff smith
Salesforce is great. Um, um, great, great company. I think they will benefit from AI. From the time we started working on it until now, performance has gotten much better and the multipliers have gone down. It’s not, it’s not an execution issue. As you say, software in general and value software in particular, companies that aren’t growing by more than 20 percent, are under more pressure. They’re growing, they’re growing double digits, but they’re not growing as much as others would like.
01:24 Brian Sozzi
That being said, is it time to pick the bottom of Salesforce? Let’s take it to the bid-opening roundtable. Victoria Fernandez, Brooke Dema, Eze Fry. Victoria, come here. In other words, Salesforce is a company that is still growing in sales and profits. Well, they put out reasonable guidance in December. The street is horribly wrong – do I think I’ve priced this stock wrong here?
01:47 victoria fernandes
Yeah, well, in your clip you were talking about valuation, which is about 19 to 20 times expected earnings. So we find that it decreases quite significantly. I think they are right in the sense that this company is not a bad company. They have a good strong balance sheet and good cash flow. They are leaders in the CRM business. Rather, the question is how to address the needs of software with AI. I mean, a new version of Slackbot was just released this week, and the stock fell 6% on that news. So I think there’s a real disconnect between innovative components on the product side and inventory performance, and we need to find a way to bring them back together. This applies not just to Salesforce, but to the entire software sector. Iso-weighted software performs much worse overall than iso-weighted techniques. So what are they going to do to get the most out of AI when people still need it and it’s not going to replace them? I think that’s the key. If we can understand that, this company will continue to do great things in the future. I’m not completely ready to throw in the towel. I want to see what Marc Benioff can continue to do. There’s great leadership there, great minds working there. I think they’ll figure something out. Um, but it’s taking a little bit of time, so if you have that in your portfolio, it’s affected you a little bit.
03:13 Brian Sozzi
And Brooke, this is not just a Salesforce issue. I know we’re bringing you up as a rising star today, but we at Adobe are under pressure, and so are Snowflakes. So the pressures we’re seeing at Salesforce are basically spreading throughout the industry.
03:22 brooke dipalma
And as Victoria alluded to earlier, we’ve seen a rotation in software stocks since the beginning of the year. Well, Salesforce is one of the biggest loss companies, down about 11% since the beginning of the year. At YF Interactive, you can see that Okta was recently upgraded from Stevens. IBM is also scheduled to announce its financial results on January 28th, and momentum is building. Like Palo Alto, that’s exactly what we’re seeing, and we’re seeing some momentum. Electronic Arts is trying to keep it that way. But we’re seeing such a huge decline across the board as we start and open the year for Adobe, which is also one of the biggest losers. As you can see on this screen, Salesforce seems to be sitting on the laggard side. If you look at the past few years, there were times when Salesforce crossed that 350 threshold, but the company has actually taken a solid hit over the past few months, just in the last month alone. We are seeing a downward trend of about 7%. If you look at the last few months, the last three months, you can see that the stock price has actually moved from this $240 to about $2.25. Over the past year in particular, Salesforce has arguably taken the biggest hit, dropping nearly 27%, followed by Adobe.
04:44 Brian Sozzi
got it. A huge thank you for your roundtable bid, Victoria and Brooke, thank you.
