On Thursday, TD Cowen adjusted the price target for Salesforce.com (NYSE:CRM) shares, a leader in customer relationship management software, citing a miss in the company's current remaining performance obligations (cRPO) growth and challenging macroeconomic conditions. The price target was lowered to $285.00 from the previous $330.00, while the firm maintained a Hold rating on the stock.
Salesforce.com reported a cRPO growth of 10%, which was 2% below its own guidance. This marks the first instance where the company has not met its cRPO projections.
Management attributed the shortfall to tougher macroeconomic conditions and the impact of go-to-market (GTM) changes implemented in the second quarter.
The company's shares saw a significant drop in after-hours trading, falling by 16% to approximately 16 times its expected value to CY25E free cash flow (EV/CY25E FCF).
Despite this downturn, Salesforce.com's management remains positive about the company's strategic growth areas and anticipates a stronger performance in the second half of the year.
TD Cowen's analysis suggests a preference for companies with consumption-based business models, like ServiceNow (NYSE:NOW) and Microsoft (NASDAQ:MSFT), over those with traditional license-based models.
Additionally, the firm indicated that smaller-cap companies might present better investment opportunities than large-cap names in the current software market environment.
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