By Senad Karaahmetovic
Shares of Salesforce (NYSE:CRM) are down about 2% in pre-open Friday after Atlantic Equities analysts downgraded to Neutral from Overweight. They also cut the CRM stock target by 30% to $140 per share.
In a downgrade note sent to clients this morning, the analysts outlined several concerns, including several top executives leaving the software maker, Slack facing increased competition from MS Teams, headwinds that its Platform business is facing, as well as fears that Salesforce's growth could be more cyclical than in the past.
"The broad C-suite management exodus and a risk of slower-than-expected revenue growth. The cRPO 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," they said in a note.
The analysts are also worried that the market is overvaluing CRM shares, which trade over 6% above Atlantic's new price target.
"We fear investors could increasingly focus on GAAP valuation given slowing revenue growth, which would make Salesforce shares look expensive," the analysts added.
CRM stock was downgraded to Underperform at Bernstein two days ago with their analysts seeing more pain ahead.
"Comparing the valuation of Salesforce against peers we find that Salesforce is overpriced, as it has a similar growth rate to peers but lower margins and lower quality earnings," they wrote.
Salesforce stock closed at $149.60 yesterday.