Bernstein Downgrades Salesforce Shares Sees More Pain Ahead

Bernstein Downgrades Salesforce Shares Sees More Pain Ahead by Emily Clark last updated on February 01, 2023

Bernstein Downgrades Salesforce Shares, Sees More Pain Ahead

Salesforce is listed on the NYSE with the ticker 'CRM' and is a major tech company. Recently, analysts from Bernstein have downgraded the rating of Salesforce from 'Market Perform' to 'Underperform.' As a result of this rating downgrade, the shares of Salesforce lost 2.5% of their value during Wednesday's pre-open session.

According to Bernstein, there is a lot more pain ahead for Salesforce. They also highlighted how there are a lot of catalysts that can lead to a lower multiple for the stock.

$119 Is The New Target For Salesforce

Bernstein has set a price target of around $119 for the Salesforce stock, which was set at $134 earlier. This means that there is a risk of around 20% downside from the stock's recent closing price.

In addition, they also compared the Salesforce valuation with other companies in the same sector. After the analysis, they reached the conclusion that Salesforce stock is overpriced despite having the same growth rate as other companies.

Another worrying trend is the Salesforce earnings and markings, which are also low when compared with its peers. So as far as Bernstein is concerned, they have a lot of reasons for this rating downgrade.

The analysts also heightened the decelerating growth of Salesforce in the last few years. But according to the experts, Salesforce managed to mask this troublesome trend with the help of M&A deals.

But now that the M&A deals are no longer providing enough tailwind, it means a lot of trouble for Salesforce. For starters, there's a cloud saturation in the market as the number of competitors is increasing. On top of that, Salesforce is also facing a lot of macro issues which have slowed down its growth.

And last but not least, the management at Salesforce is focused on driving margins. And to achieve that, the company will have to witness the negative impact of growth, efficiency, and even lower employee/customer satisfaction.

So, for now, Bernstein believes that an increase in margins is highly unlikely for Salesforce.