Salesforce Stock Falls on the Bernstein Rating, Stating It Is “Overpriced” Relative to Rivals

Salesforce Stock

Salesforce Stock (NYSE:CRM)

Bernstein, an investment firm, downgraded cloud computing software giant Salesforce (NYSE:CRM) and cited the business’s poor financials as the reason for the downgrade. This caused Salesforce stock to drop over 3% in premarket trade on Tuesday.

Analyst Mark Moerdler downgraded Salesforce stock to underperform from market performance and reduced the price target to $119 from $134, citing the need for additional margin improvements despite the company’s guidance towards $50B in sales for fiscal 2026.

Moerdler said in a letter to clients, “…pressure has grown for more profound margin improvements, while growth has continued to decline and the firm has failed expectations.”

According to Moerdler, the latest layoffs, which will affect around 10% of the company’s workforce, are anticipated to “only induce significant slowing in growth.” In addition, the corresponding margin increase could only be realized after a while. If they are, they might be smaller than Wall Street is anticipating.

“When we compare the value of Salesforce to that of its contemporaries, we find that Salesforce is overpriced,” said Moerdler. “Salesforce has a growth rate comparable to that of its peers, but it has lower margins and worse quality profits.”

As part of the company’s restructuring, Salesforce CEO Marc Benioff said that the organization had employed “too many employees” and that he accepted personal responsibility for the situation.

The majority of analysts have a positive outlook for Salesforce. Seeking Alpha contributors have given it a rating of HOLD. In contrast, Wall Street analysts have given it a recommendation of BUY. On the other hand, the quantitative approach at Seeking Alpha, which often outperforms the market, has CRM rated as a STRONG BUY.

Featured Image: Pixabay @ RJA1988

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