Salesforce Stock Down 6% Today – Time to Buy CRM Stock?

The price of Salesforce stock is down 6% today in pre-market stock trading action following the release of the firm’s financial results covering the third quarter of its 2021 fiscal and after announcing the appointment of a Co-CEO.

For the three months ended on 31 October, Salesforce reported total revenues of $6.4 billion resulting in a 26% jump compared to a year ago while in line with Wall Street’s estimates for the period.

Sales in Europe contributed to the firm’s positive performance during the quarter as they jumped 35% compared to Q3 2020 while top-line results in the Americas advanced a more modest 23% on a constant currency basis.

Salesforce’s non-GAAP operating margin for the period stood at the same level compared to last year at 19.8% while its non-GAAP net income increased 27.1% at $1.36 billion resulting in non-GAAP earnings per share of $1.27.

This bottom-line adjusted figure represented a 27% decline compared to the $1.74 reported a year ago but it still beat Wall Street’s estimate of $1.74 per share by a long shot.

Earnings guidance from the firm for the upcoming fourth quarter of 2021 was $0.73 per share. This figure is 11% below the Street’s forecasts and could explain why Salesforce stock is dropping today.

Meanwhile, Salesforce shared its guidance for the full 2022 fiscal year, with revenues being expected to land at around $26.4 billion while non-GAAP earnings per share are expected to stand at $4.69. This sales forecast was in line with Wall Street’s predictions but earnings were slightly below the expected target of $4.42 per share.

Additionally, Salesforce announced that it has promoted Bret Taylor as its Co-Chief Executive Officer to join Marc Benioff at the helm. Mr. Taylor had served as Chief Operating Officer for the company since 2019 and previously as President and Chief Product Officer.

“Bret is a phenomenal industry leader who has been instrumental in creating incredible success for our customers and driving innovation throughout our company. He has been my trusted friend for years, and I couldn’t be happier to welcome him as Co-CEO”, stated Benioff in regards to the appointment.

The stock’s reaction to the news seems to indicate that markets are not necessarily happy with the decision although it could have more to do with the fact that Salesforce is experiencing worst-than-expected sequential declines in its bottom-line adjusted profitability.

What can be expected from this tech stock as we head to the end of 2021? In this article, I’ll take a look at the price action and fundamentals of CRM stock to outline plausible scenarios for the future.

67% of all retail investor accounts lose money when trading CFDs with this provider.

Salesforce Stock – Technical Analysis

The price action in Salesforce stock for the past couple of days has been quite wild as the stock initially jumped 4% on 29 November to then shed most of those gains yesterday upon posting a 4% loss. As a result, the stock accumulates a 5% decline so far in November.

Meanwhile, today’s pre-market downtick is pushing CRM stock below a key support found at the $284 level and the market could aim to close the open gap left behind on 23 September back when the company announced that it was raising its revenue guidance for the 2022 fiscal year.

The latest weakness in the tech sector prompted by inflation-related concerns could further support this bearish outlook for CRM stock even though US Treasury bond yields have retreated from their early November highs.

Today’s decline is prompting a break below the stock’s short-term moving averages while the next support area to watch would be the 200-day simple moving average, which is currently standing at $249.3 per share. This results in a total 12.5% downside risk based on yesterday’s closing price.

Momentum indicators are also favoring a bearish outlook as the Relative Strength Index (RSI) is on a sharp downtrend and seems poised to enter oversold territory soon while the MACD has already crossed below the signal line and is moving to negative territory. This move is being accompanied by steadily increasing negative histogram readings.

Salesforce Stock – Fundamental Analysis

Based on Salesforce’s revenue and adjusted EPS guidance for 2022, the company is displaying the following valuation metrics based on yesterday’s closing price of $284.96 per share:

P/S: 10.5x

P/E: 61x

EV/EBITDA: 33x

Interestingly, Salesforce’s adjusted EPS is expected to decline during the 2023 fiscal year while its GAAP EBITDA is expected to increase by around 19%. None of this performance justifies the firm’s current valuation as Salesforce appears to be entering a stage of stalled-to-negative bottom-line growth.

With this in mind, the downside risk for the stock is quite large and the technical readings could be signaling an upcoming downtrend in the price in the following weeks.

Buy CRM Stock at eToro with 0% Commission Now!