Salesforce Stock Falls as Citi Adds Bearish Catalyst Watch on Slowing Demand

Salesforce Stock

Salesforce Stock (NYSE:CRM)

In premarket trading on Friday, shares of Salesforce (NYSE:CRM) were down slightly. This was because investment firm Citi launched a negative catalyst watch and said it had noticed “slowing demand” signals leading up to the release of the company’s earnings for the fourth quarter.

Analyst Tyler Radke, who has a neutral rating on Salesforce stock, pointed out that partner checks indicated further slowing from the third quarter. There is an overall “fatigue” for front office or customer relationship management software, which could limit the upside for the period and the company’s initial outlook for fiscal 2024. Radke noted that these trends followed further slowing from the third quarter.

In a letter to customers, Radke said, “Conversations with CRM partners imply the negative demand situation hasn’t let up with calendar 2023 growth outlooks degrading to 8-10% (vs. 15% in our pre-F’3Q23 checks).” The analyst continued by saying that the price comments were “mixed” despite some positives, such as “more resilient top-of-funnel trends” and solid demand from the public sector.

As a result, Radke feels that shares might be “ready for a near-term downturn as margin upside may be priced in and growth metrics could disappoint.” This is because shares have increased by around 27% year-to-date due to cost-cutting and activist engagement.

Despite the prospect of lower margins, Radke increased his price objective for a Salesforce stock to $182 from $164. He based this increase on the company’s strong revenue growth. In addition, he decreased his revenue growth predictions for the fiscal year 2024 to reflect the reduced performance responsibilities for the present income stream.

On March 1, Salesforce (NYSE:CRM) will release the company’s financial results for the fiscal fourth quarter.

Earlier in the week, the investment firm Wells Fargo said that increases in Salesforce (NYSE:CRM) margins and the participation of activist investors would work as good catalysts for the Salesforce stock price.

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