To The Moon

What the heck happened to Salesforce?

Tech stocks have taken a nasty tumble this year, but some are doing even worse than others. Exhibit A: software giant Salesforce.

Shares of Salesforce (CRM) have plunged about 40% so far in 2022. That makes it the second-worst performer in the Dow, trailing only chip leader Intel (INTC). Salesforce (CRM) has lagged the performance of top cloud software rivals such as Microsoft (MSFT), Germany’s SAP (SAP) and Oracle (ORCL).

Salesforce isn’t really doing all that badly. In fact, the company reported sales growth of 22% from a year ago back in August, but it also cut its revenue and profit forecasts at the time.

Salesforce said it now expects earnings per share of about $1.20 to $1.21 for this quarter and sales of $7.82 billion to $7.83 billion. Analysts had been expecting earnings of $1.29 a share and revenue of nearly $8.1 billion.

So is Salesforce, led by co-CEOs Marc Benioff and Bret Taylor, due for a comeback in 2023? Or will the company remain in Wall Street’s penalty box as it absorbs and integrates a series of expensive acquisitions over the past few years?

Salesforce has spent nearly $50 billion since 2018 to buy application software company MuleSoft, data visualization software leader Tableau and workplace productivity suite Slack. The Slack deal cost Salesforce about $28 billion.

Investors will get an update on how all these deals are panning out when Salesforce reports its latest earnings after the closing bell Wednesday. Analysts are predicting that sales will be up 14% from a year ago but profits will fall slightly.

Salesforce president and chief financial officer Amy Weaver conceded during an analyst meeting in September that “we have seen increased risks and uncertainties” in recent months. But she stressed that demand for the company’s software remains strong.

A majority of Wall Street analysts remain bullish on Salesforce. According to data from Refinitiv, 40 of the 50 analysts that cover the company have a “buy” rating on the stock. (The remaining 10 have a “hold.” There are no “sell” recommendations.)

And the consensus price target for the stock is nearly $216 a share, 40% higher than current levels.

Still, analysts are likely to have questions about what’s next for Slack under Salesforce’s ownership. Microsoft has stepped up its own competitive efforts versus Slack with its Teams product.

“Microsoft Teams continues to be the gorilla in the room, indicating that existing customers of Salesforce have been less responsive to picking up Slack,” said Daniel Morgan, senior portfolio manager with Synovus Trust Company, in a report. “Mounting competition from Teams and increasing pricing pressure create some headwinds.”