Salesforce slips as Atlantic Equities cuts, citing execution, executive exodus

Salesforce (NYSE:CRM) shares slipped nearly 2% in early trading on Friday as Atlantic Equities downgraded the cloud computing company, citing a number of reasons including recent management departures, including co-CEO Brett Taylor.

Analyst Peter Sazel lowered his rating on Salesforce (CRM) to neutral from overweight and cut the per-share price target to $140 from $200, pointing out that growth has slowed at the company and it may not return to prior levels.

“The [current revenue performance obligation] growth has already deteriorated this year (21%, 15%, 11% YoY in the past three quarters), yet we fear that the recent departures could start hurting the company’s ability to win new deals going forward,” Sazel wrote in a note to clients. “Moreover, we believe the increased risk of revenue slowdown is also reflected in the company’s decision not to provide [fiscal 2024] revenue or EBIT margin guidance.”

Taylor is leaving the company effective the end of the month, while Slack leader Stewart Butterfield is leaving the company next year. The company has faced other management departures in recent weeks and is laying off 10% of its workforce.

Sazel also noted that Salesforce’s (CRM) Slack messaging app is facing increased competition from Microsoft’s (MSFT) Reams and others and may not hit its $4B revenue guidance for fiscal 2026.

“Furthermore, the Slack integration seems to be challenging due to different go-to-market strategies,” Sazel added.

Additionally, Sazel noted that Salesforce’s (CRM) growth could be more “cyclical” than it has been in the past, as its core markets are more than 50% penetrated, meaning they rely on employment growth for revenue.

“A slowdown in Sales and Service cloud due to slower employment was highlighted by management on the last earnings call as a reason for the slowdown that it has experienced so far,” Sazel added.

On Thursday, Salesforce (CRM) signed a deal with Walmart (WMT) to give retailers with access to local fulfillment and delivery solutions.

Analysts are largely bullish on Salesforce (CRM). It has a HOLD 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.