Salesforce (CRM) has seen its market capitalization plummet by $212 billion from its all-time high, as the company's aggressive acquisition strategy faces increasing skepticism from investors. The stock has fallen 55% from its peak, dropping from $370 to around $164, and now trades near levels not seen since 2023.
Acquisition Spree Fails to Deliver
Salesforce has spent over $65 billion on acquisitions over the years, including $27.7 billion for Slack, $15.7 billion for Tableau, $6.5 billion for MuleSoft, and $2.5 billion for ExactTarget. More recently, the company announced a $3.6 billion buyout of Fin, an AI-powered customer engagement platform, and spent $8 billion to acquire Informatica. Despite this massive outlay, the company's market cap now stands at just $134 billion, suggesting that the growth-through-acquisitions approach has largely backfired.
In a telling sign, Salesforce is winding down Quip, a productivity software it acquired for $518 million in 2016. The company's revenue growth has also slowed, with first-quarter revenue rising 13% to $11.1 billion, but organic growth was significantly lower when excluding the $444 million contribution from Informatica.
Revenue Growth Deceleration
Analysts expect Salesforce's revenue to grow by 11% this year to $46 billion, and by 9.75% next year to $50 billion. This deceleration comes amid broader concerns that the software industry is vulnerable to disruption by AI companies. Major peers like Intuit, The Trade Desk, Adobe, Workday, Autodesk, and ServiceNow have also underperformed the S&P 500 this year.
On the positive side, Salesforce has been aggressively buying back shares. It announced a $25 billion repurchase program after returning $27.5 billion to shareholders last year. The stock's forward price-to-earnings ratio has fallen to 11.7, well below the sector median of 24, and its rule-of-40 multiple—based on 10% revenue growth and a 30% EBITDA margin—suggests it is fairly undervalued.
Technical Outlook
From a technical perspective, the weekly chart shows a head-and-shoulders pattern, with the stock already breaking below the neckline at $227. A death cross formed in March when the 50-week and 200-week exponential moving averages crossed. The stock has also fallen below the 61.8% Fibonacci retracement level. If the bearish momentum continues, the next major support could be around $100. A move above $227 would invalidate this bearish outlook.
For more context, see our previous coverage on Salesforce Stock Halved: SaaSpocalypse Fears and Growth Concerns Weigh and Salesforce Hits 52-Week Low as Record 14-Day Losing Streak Deepens AI Fears.
While the stock appears undervalued on some metrics, the risk of further declines remains as demand for software firms continues to weaken. In the long term, a rebound is possible if investor sentiment rotates back toward the sector.
This article is for informational purposes only and does not constitute financial advice.
