Salesforce stock hit a new three-year low after recording its lowest close since February 2023, when it finished at $161.62. It now sits at $157.74.
Does this mean that the SaaSpocalypse is still in full force, and that Salesforce’s future hangs in the balance? Or is this just a temporary blip as the market readjusts around changing AI demands?
What’s Happened to Salesforce’s Stock?
The beginning of the year proved volatile for Salesforce shares, which plummeted by 25% in one year as “SaaSpocalypse” narratives continued to circulate.
In April, it dropped nearly 9%, and at the beginning of June, it peaked at a new high since February, before dropping 23% at the time of writing.
What Does This Mean?
Although Salesforce CEO Marc Benioff appears to remain confident about Salesforce’s position in the turbulent SaaS market, insisting that this “isn’t [his] first SaaSpocalypse”, it has still caused concern amongst analysts and investors who are keenly observing the company’s performance.
Rishi Jaluria, an RBC Capital Markets analyst, noted that this dip comes at a time when sentiments toward application software vendors are “particularly weak”. Salesforce announced its latest acquisition, Fin, just yesterday, which has likely spooked some investors.
Although this should realistically be a win for the company, Juluria said this means the company has “[a] lot to integrate.”
SF Ben Founder Ben McCarthy said that this dip has likely come as a result of continuously faltering confidence in Salesforce’s AI offerings compared to others in the market, heightened by the release of several high-profile IPOs from OpenAI, SpaceX, and Anthropic.
“We are still very much in the Sapocalypse,” he said. “Salesforce’s biggest challenge at the moment is going to be proving adoption. [It is] getting all this Agentforce revenue locked in in advance, but it doesn’t mean people are using it.
“I don’t think anyone realistically is thinking Salesforce is going to disappear… Salesforce CRM, Sales Cloud, and Service Cloud are very much baked into organizations.
“There’s only a certain amount of money in the world, and if people don’t see Salesforce as a high-growth stock anymore, they’ll move it out and put it into Google, Meta, or something like that.”
The Bigger Picture
Although Salesforce’s plummeting stock is already beginning to stoke both worry and ridicule, Ben believes that the stock performance is simply following the same pattern as other major SaaS companies such as Adobe, DocuSign, and ServiceNow.
The company’s revenue growth is within the double digits, and Agentforce has surpassed the $1B ARR mark for the first time. These earnings results were largely well-received and initially pushed the stock higher.
Not only that, but examining Salesforce’s price-to-earnings ratio (P/E), it currently sits at 18.72. This means that Salesforce’s share is trading at 18.72 times the company’s earnings, and that the stock is considered fairly valued. High-growth AI companies have a much higher P/E (Palantir’s P/E is 149.72, for example) because investors expect faster future growth.
So could this be a perfect storm of anxiety around large acquisitions, slower growth, and AI promises? All answers seem to point to yes.
Final Thoughts
It appears that Salesforce’s business fundamentals are improving, but investors remain unconvinced that Agentforce can drive the level of AI adoption and future growth needed to justify a higher valuation.
The company’s stock has been turbulent for quite some time, with these peaks and troughs arguably becoming more commonplace, although we are seeing the dips increase due to an uncertain SaaS market.
