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It’s time to move to the sidelines on Salesforce stock: Bernstein

By:
on Jan 11, 2023
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  • Bernstein analyst downgrades Salesforce Inc to "underperform".
  • Mark Moerdler says recently announced layoffs won't salve CRM.
  • Salesforce stock has already lost close to 25% since mid-August.

Salesforce Inc (NYSE: CRM) is in focus on Wednesday after a Bernstein analyst said in his bearish note that the cloud company was slipping into a “growth purgatory”.

Salesforce stock could lose another 20%

Mark Moerdler now rates this tech stock an “underperform” and warns of downside to $119 a share – nearly a 20% leg down from here.

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Last week, Salesforce announced plans of trimming its global workforce by about 10% (find out more). Still, citing lower margins than rivals, the analyst wrote:

Growth is slowing and mgmt is implementing cost reductions to drive margin improvement. These cuts will take time to flow. Much of the savings are necessary to offset slowing growth, and therefore, big lift to margins is unlikely.

Higher rates that are likely to keep up for longer spell more pain ahead for the California-based company as well. Salesforce stock has already lost close to 25% since mid-August.

Salesforce can no longer hide deceleration

In November, Salesforce issued weaker-than-expected guidance for its Q4 revenue as Invezz reported here.

According to Mark Moerdler, acquisitions helped the software company conceal its decelerating growth for years. But that tailwind is no longer sufficient. He added:

With core markets approaching cloud saturation, competition increasing, and macro issues hitting growth, mgmt is pivoting to driving margins. But cuts will negatively impact efficiency, growth, and customer/employee satisfaction.

All in all, the Bernstein analyst sees Salesforce stock as “overpriced” at current levels. It is also noteworthy that Bret Taylor – the co-Chief Executive of Salesforce Inc is set to exit the role at the end of this month.