Salesforce.com Stock Under Selling Pressure

Salesforce.com stock is facing selling pressure on Monday following a rating downgrade by Piper Sandler analyst Brent Bracelin. Bracelin's broader call suggests that Street estimates for 2024 are too optimistic for cloud software.

Rating Downgrade and Price Target Adjustment

Bracelin downgraded Salesforce stock (ticker: CRM) from Overweight to Neutral. He also lowered his price target on the stock to $232 from $268. While the analyst acknowledges that the valuation remains reasonable, he points out that execution risks are increasing.

Downgrades on Other Stocks

Bracelin also downgraded four other stocks in addition to Salesforce. He lowered the rating on Asana stock (ASAN) from Neutral to Underweight and adjusted the target to $16 from $24. Similarly, Alteryx stock (AYX) was downgraded to Underweight from Neutral, with a target of $30. Matterport stock (MTTR) saw its rating drop to Neutral from Overweight, with a new target of $2. Additionally, Unity Software stock (U) had its rating changed from Overweight to Neutral, with a target of $30, down from $48. Bracelin also reduced his targets on 11 other software stocks.

Despite the reasonable valuation, Salesforce.com stock faces increasing execution risks, leading to a rating downgrade and a revised price target.

Lowering Growth Estimates and Price Targets for 2024

Introduction

A recent research note by an analyst raises concerns about the growth estimates and price targets for 2024. Highlighting the need to reflect near-term demand stabilization trends, the note suggests a potential disparity between current expectations and an overly optimistic acceleration in median consensus growth rates. The analyst points out that both Workday (WDAY) and Accenture (ACN) have already lowered their growth expectations for the upcoming year.

Major Risk Factors for 2024

The research note identifies several significant risk factors for 2024. Firstly, the analyst believes that Street estimates are excessively high, warranting a downward adjustment. Additionally, the shift in customer-budget priorities towards testing and implementing generative-artificial-intelligence features poses a notable risk. This change may result in other technology providers experiencing a reduced share of IT budgets, creating what the note terms an "air pocket" risk.

Furthermore, evidence of weakness in various third-party measures of customer activity during September, such as visitor-growth trends on websites, is cause for concern. The note asserts that valuations for both large caps and smaller names reveal little margin for error. Lastly, "investor sentiment remains mixed" due to apprehensions surrounding interest rates and macroeconomic conditions.

Analyst's Recommendations

Despite the aforementioned risks, the analyst maintains "highest conviction" buy recommendations for Microsoft (MSFT) and Procore Technologies (PCOR). Microsoft stands to benefit from AI-related business catalysts, while Procore Technologies are expected to thrive under government stimulus programs.

To conclude, the research note urges a proactive adjustment of 2024 growth estimates and price targets, aligning them with the current demand stabilization trends. By acknowledging the potential challenges and making necessary adaptations, technology providers can better navigate the evolving landscape.

Tech Stock Update

The stock market has seen some notable movements today. Here is a breakdown of the performance of a few prominent tech stocks:

Salesforce (CRM)

Salesforce stock is currently trading at $200.55, reflecting a decrease of 1.6% compared to the previous day.

Asana (ASAN)

Asana stock has experienced a decline of 3.1%, indicating a decrease in its market value.

Unity (U)

Unity stock has witnessed a reduction of 2.7% in its price, contributing to its lower performance today.

Alteryx (AYX)

Alteryx stock is down by 4.1%, which has resulted in a dip in its overall value.

Matterport (MTTR)

Matterport stock has encountered a significant drop of 6.2%, indicating a decline in investor confidence.

Retain result in markdown format.