Salesforce (CRM) Dips 8% in 3 Months: What Should Investors Do Now?

Stock Performance - Salesforce's stock has declined more than 8% over the past three months, underperforming the S&P 500 and the Zacks Computer and Technology sector, which both gained over 4% [1] - Within the Zacks Computer – Software industry, Salesforce lags behind competitors like Oracle and SAP, whose shares rose more than 10% in the same period [1] Sales Growth - Salesforce's sales growth has significantly slowed, with Q1 fiscal 2025 growth barely reaching low double digits, compared to over 20% growth consistently until fiscal 2022 [2] - The Zacks Consensus Estimate predicts Salesforce's top-line growth will slow further, settling into a mid-to-high single-digit percentage range for fiscal 2025 and 2026 [3] - Current Qtr (7/2024) sales are estimated at $9.23B, with year-over-year growth of 7.29%, while Current Year (1/2025) sales are estimated at $37.83B, with 8.53% growth [4] Earnings Growth - Salesforce's EPS is projected to grow at a CAGR of 15.3% over the next five years, a sharp decline from the 42.9% CAGR achieved in the previous five years [4] - Current Qtr (7/2024) EPS is estimated at $2.36, with year-over-year growth of 11.32%, while Current Year (1/2025) EPS is estimated at $9.90, with 20.44% growth [5] Competitive Landscape - Salesforce faces intensifying competition from Microsoft, Oracle, and SAP, who are ramping up efforts to capture a larger share of the CRM and cloud computing markets [6] - Microsoft's Dynamics 365 is gaining popularity among enterprises already in the Microsoft ecosystem, while Oracle and SAP offer integrated solutions appealing to large organizations [6] - Newer entrants in the CRM space are introducing innovative features and competitive pricing, further squeezing Salesforce's market share [6] Strategic Shift - Salesforce has shifted focus from aggressive growth to margin improvement, involving significant cost-cutting measures, including layoffs [3] - While these moves have boosted short-term profitability, they have also led to reduced investments in critical areas like sales and marketing, contributing to the slowdown in sales growth [3]