Salesforce.
com stock is coming under selling pressure Monday after Piper Sandler analyst Brent Bracelin cut his rating on the cloud-based enterprise-software giant as part of a broader call asserting that that Street estimates for 2024 look too optimistic for cloud software.
Bracelin reduced his rating on Salesforce stock (ticker: CRM) to Neutral from Overweight, while trimming his price target on the stock to $232 from $268. The analyst writes that “valuation remains reasonable,” but that “execution risks are increasing.”
The analyst also lowered ratings on four other stocks. He cuts
Asana
stock (ASAN) to Underweight from Neutral, with a new target of $16, down from $24, and likewise downgrades
Alteryx
stock (AYX) to Underweight from Neutral with a target of $30 (he had no previous target on the stock.) For
Matterport
stock (MTTR), his rating drops to Neutral from Overweight, with a new target of $2, down from $4. And for
Unity Software
stock (U), he moves to Neutral from Overweight, with a target of $30, down from $48. In addition, Bracelin cut his targets on 11 other software stocks.
“We are proactively lowering our 2024 growth estimates and price targets across our coverage list to better reflect near-term demand stabilization trends that may not support what appears to be an overly optimistic acceleration in median consensus growth rates,” the analyst writes in a research note. He notes that last month both
Workday
(WDAY) and
Accenture
(ACN) lowered growth expectations for next year.
In the note, Bracelin sees major risk factors for 2024.
For starters, he thinks Street estimates are too high. Also, he thinks the shift in customer-budget priorities to testing and implementing generative-artificial-intelligence features creates an “air pocket” risk for other technology providers who could sees reduced share of IT budgets.
The analyst also says there were signs of weakness in some third-party measures of customer activity in September, including visitor-growth trends to websites. Bracelin contends that valuations for both large caps and smaller names show “little margin for error.” And not least, he says that “investor sentiment remains mixed,” on concerns over interest rates and macroeconomic conditions.
Bracelin adds that his “highest conviction” buy recommendations remain
Microsoft
(MSFT), where he sees AI-related business catalysts, and
Procore Technologies
(PCOR), which he thinks will benefit from government stimulus programs.
Salesforce stock is 1.6% lower Monday, to $200.55. Meanwhile, Asana stock is off 3.1%, Unity stock is 2.7% lower, Alteryx stock is down 4.1%, and Matterport stock has slumped 6.2%.
Write to Eric J. Savitz at [email protected]
Read the full article here
