Salesforce stock has plunged by more than 50% from its December 2024 peak as concerns about its growth outlook have intensified. Its market capitalization has fallen from more than $347 billion to about $136 billion, and the selloff could continue as investors remain concerned about the company’s strategy and long-term growth prospects.
Salesforce stock has dropped amid SaaSpocalypse fears
CRM stock has been in a steep decline over the past few years as concerns about its growth have escalated. Recently, the stock has dropped because of the rising SaaSpocalypse fears.
SaaSpocalypse is a relatively new term referring to fears that AI agents will replace traditional software and the “per seat” pricing model. A good example of this is what Starbucks is doing.
According to Bloomberg, the company is now building its own AI-assisted replacement for a Microsoft system that tracks inventory and an IBM solution that manages maintenance. It aims to save the $400 million it spends annually on software.
The fears in the software industry escalated this week after IBM published its financial results. IBM said that its business slowed as customers reprioritized their capital expenditure, redirecting it towards hardware purchases like servers and memory.
Salesforce’s organic growth has been slowing for a while. The most recent results showed that its revenue rose by 13% in the first quarter. While this growth is solid for a company that has been in business for years, it was not organic. Its $11.1 billion revenue included $444 million from Informatica, a company it acquired in a $8 billion deal.
The company has been one of the most acquisitive ones in the US. It has spent billions of dollars acquiring firms like Own Company, Fin, Bluebirds, Tableau, and Slack.
Analysts expect that Salesforce’s business will remain under pressure in the coming months. The average estimate is that its revenue jumped by 10% in the last quarter to $11.32 billion. Its annual revenue is expected to be $46.1 billion, followed by $50.4 billion next year.
Bargain or a value trap?
At face value, there are signs that Salesforce stock has become a bargain. For one, its Non-GAAP forward price-to-earnings ratio has dropped to 11.8, well below the sector median of 24. Its five-year average stands at 24.
Similarly, the forward PEG ratio stands at 0.73, also lower than other companies in the tech industry. The challenge, however, is that these valuation metrics include the extra funds made from its Informatica buyout.
As a result, the company will need more growth catalysts over time. One of this catalysts will be its Agentforce and data segments, whose annual recurring revenue soared to $3.4 billion, a 200% jump. It has deployed over 3.8 billion Agentic Work Units (AWU) across Agentforce and Slack.
READ MORE: Salesforce stock falls after KeyBanc downgrade on AI growth concerns
CRM stock technical analysis
Salesforce stock chart | Source: TradingView
The weekly chart shows that the CRM share price has slumped in the past few years, moving from a record high of $367 to a low of $146. It remains below the 50-week Exponential Moving Average (EMA).
The stock has also remained below the Supertrend indicator and the 78.6% Fibonacci Retracement level.
Therefore, the stock will likely remain under pressure in the near term. In this, it may drop and retest the year-to-date low of $146.
In the long-term, however, the stock will likely bounce back as investors buy the dip in software stocks.
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