MarketWatch First Take: Salesforce investors should be nervous about slower growth

by | Jan 4, 2023 | Stock Market

Salesforce.com Inc. investors are facing the company’s first big pothole on the road to slower growth, just as they have recently put all their faith into co-founder Marc Benioff amid a slew of departures by top executives. On Tuesday, the cloud-based software company confirmed that it will cut 10% of its workforce, which totaled 73,541 as of Jan. 31, 2022, its last annual regulatory filing. Benioff acknowledged that the company hired too many employees ahead of the current economic downturn, as its revenue growth accelerated during the pandemic. “I take responsibility for that,” he said in a letter to employees filed with the Securities and Exchange Commission.

Salesforce
CRM,
+3.57%
is indeed facing turbulence as it faces the biggest slowdown in its revenue growth rate in over a decade. Currently, the consensus on Wall Street is for annual revenue growth of 16.92% for fiscal 2023, ending in January, and 10.48% for fiscal 2024, after over a decade of revenue growth ranging from 22% to 37%. “The key takeaway is that the restructuring today underscores the movement that has begun at Salesforce already — a bit of reckoning of what they are going to be,” Rob Oliver, an analyst at Robert W. Baird, told MarketWatch. “Are they going to be just a growth company or are they going to be more than that?” Oliver pointed out that Salesforce in the past gave revenue targets as goals, but has most recently given margin targets as part of its focus on profitability for investors. That view was echoed by others on Wall Street. “While the company stopped short of providing margin guidance for FY24 during its F3Q earnings call or in this morning’s filing, we believe the headcount reduction displays commitment to margin expansion,” Stifel Research analysts said in a note to clients. Shares of Salesforce, which fell about 47% in 2022, rose nearly 4% on Wednesday, as investors saw the cuts as the first step in getting the company in bette …

Article Attribution | Read More at Article Source

Share This