Takako Hatayama-Phillips
Salesforce (NYSE:CRM) shares slipped fractionally in premarket trading on Thursday as investment firm Baird downgraded the cloud computing giant, citing weak macro conditions and the recent exodus of two key executives.
Analyst Rob Oliver lowered his rating on Salesforce (CRM) to neutral from outperform, noting that the company’s revenue growth could be hit by the weakening global economy and “seat-based software pressure” as a result of recent layoffs and hiring slowdown at some of the company’s customers.
With regards to the departures of co-CEO Brett Taylor, Slack co-founder Stewart Butterfield and other Salesforce (CRM) executives, Oliver said he did not want to speculate on the reasons why they were leaving, but that it could add to “execution risk.”
“While we do not want to speculate the reasoning behind these departures, we believe the recent executive turnover adds some execution risk, particularly of this magnitude,” Oliver wrote in a note to clients. “While we are not surprised to see Slack departures in the wake of Taylor’s announcement (he was the champion of the Slack acquisition), it nevertheless represents increased risk.”
Other Salesforce (CRM) executives have left in recent months, including Chief Product Officer Tamar Yehoshua and Senior VP of Marketing, Brand, and Communications Jonathan Prince.
In addition, Oliver noted that the recent macro softness, which Salesforce (CRM) called out on its third-quarter earnings call, could result in revenue pressure in 2023, as marketing spending is “easy/quick to pull back” and there was less expansion of sales and services in incremental hiring.
The analyst lowered his fiscal 2024 estimates as a result.
Speaking at a UBS conference earlier this week, Salesforce (CRM) Chief Financial Officer Amy Weaver stressed that even though “people love to try to connect the dots,” the departures of Taylor and Butterfield, in particular, “are either completely unrelated events.”
Analysts are universally bullish on Salesforce (CRM). It has a BUY rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha’s quant system, which consistently beats the market, rates CRM a STRONG BUY.
