Salesforce’s Shares Slumped After Its Latest Update

Salesforce’s Shares Slumped After Its Latest Update

over 1 year ago2 mins

Mentioned in story

Salesforce reported unexpectedly strong results earlier this week, but investors fretted about some bumps in the road.

What does this mean?

Digitization is a hot topic right now, and Salesforce hasn’t just got a finger in the pie: it’s got all ten of them in there. The firm’s wide range of products, from its flagship sales cloud software to the workplace messenger Slack, has drawn customers aplenty, even as the economy’s gone (ahem) slack. That success continued last quarter, with both revenue and profit growth beating analyst expectations – but there are signs the downturn’s begun to rock even Salesforce. Businesses are taking a leaf from the Jungle Book right now, spending on nothing but the bare necessities, which could be why the firm says it’s facing “intense customer scrutiny”. That's reflected in the numbers: the company's 14% revenue growth last quarter versus the same time the year before was the first time the metric’s ever come in under 20%. That, plus a worse-than-expected revenue outlook, could explain why investors sent Salesforce’s stock down 7%.

Salesforce revenue
Source: Salesforce

Why should I care?

Zooming in: Taylor’s high-tailin’.

The sudden departure of Salesforce’s co-CEO probably didn’t reassure investors either: they ran day-to-day operations at Salesforce, and their speedy exit has raised questions about why they’re really leaving and who’s going to step into their shoes. And on an even more basic level, the co-CEO was considered quite the asset: helping invent Facebook’s like button and creating Google Maps are pretty impressive achievements, after all.

Salesforce stock
Source: Google Finance

For markets: Think twice.

It’s been a dire year for the stocks of cloud software companies like Salesforce, with an index that tracks some of the biggest names in the industry dropping over 40%. But don’t rush out to grab a bargain just yet: see, a key valuation metric of the index is still well above its long-term average, and analysts reckon cloud players’ shares could drop even further as the sector’s growth slows.

Tech could underperform
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