Salesforce stock continues its strong downward trend this year, and is now hovering near its lowest level since 2023. CRM has plunged by 55% from its all-time high, with its market capitalization falling from $346 billion to $134 billion, a $212 billion wipeout.
Salesforce continues its growth through acquisitions
The CRM stock price has plunged this year amid concerns that the software industry is at risk of a major disruption by AI companies. Indeed, top companies like Intuit, The Trade Desk, Adobe, Workday, Autodesk, and ServiceNow are among the worst laggards in the S&P 500 Index this year.
Salesforce has also faced the challenge of slowing organic growth, with the management pivoting towards acquisitions. It continued this trend this week after it announced a $3.6 billion buyout of Fin, a company that leverages AI in customer engagement.
Before acquiring Fin, the company spent billions of dollars on acquisitions. Most recently, it spent $8 billion to acquire Informatica. It also paid $27.7 billion for Slack, $15.7 billion for Tableau, $6.5 billion for MuleSoft, and $2.5 billion for ExactTarget. In addition, the company spent $1.9 billion to acquire Own Company and $1.35 billion for ClickSoftware.
Salesforce has spent over $65 billion in acquisitions over the years. As such, with its market capitalization standing at $135 billion, it means that its growth through acquisitions approach has largely backfired. Indeed, the company bought Quip in 2016 in a $518 million deal and is now in the process of winding it down.
Salesforce’s revenue growth has slowed
The most recent results showed that Salesforce’s revenue jumped by 13% in the first quarter to $11.1 billion. Its organic growth was much lower than that as it included a $444 million revenue from Informatica.
With Informatica’s contribution, analysts expect that the company’s revenue will grow by 11% this year to $46 billion. It will then make $50 billion next year, up by 9.75% YoY.
On the positive side, Salesforce is buying tons of stock. It announced a $25 billion repurchase program after it returned $27.5 billion last year.
At the same time, Salesforce stock has become highly undervalued. Its forward price-to-earnings ratio has moved to 11.7, much lower than the sector median of 24. Its rule-of-40 multiple, based on its 10% revenue growth and EBITDA margin of 30% makes it fairly undervalued.
Fundamentally, there is a risk that the stock will continue falling as demand for software firms continue falling. In the long-term, however, chances are that it will rebound as investors rotate towards these companies.
Salesforce stock price technical analysis
CRM stock chart | Source: TradingView
The weekly chart shows that the CRM share price has slumped in the past few years, moving from $370 to $164 today. It formed a head-and-shoulders pattern and has already moved below the neckline at $227. H&S is one of the most common bearish signs in technical analysis.
The stock formed a death cross pattern in March this year as the 50-week and 200-week Exponential Moving Averages (EMA) crossed each other. It also slumped below the 61.8% Fibonacci Retracement level.
Therefore, the stock will likely crash from the current $164 to $100 as the bearish momentum continues. On the other hand, a surge above the key resistance at $227 will invalidate the bearish outlook.
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