Salesforce Stock Plunges 28% YTD: Should You Exit the Investment?
Compared to key competitors like SAP SE SAP, Microsoft Corporation MSFT and Oracle Corporation ORCL, Salesforce's slump appears even more pronounced. Year to date, shares of SAP, Microsoft and Oracle have risen 18.7%, 23.9% and 50.1%, respectively.
YTD Price Return Performance
This underperformance signals deeper issues within Salesforce's growth story.
Decelerating Sales Growth: A Key Concern for Salesforce
Salesforce's biggest problem is slowing growth, which has turned investors increasingly cautious about its near-term prospects. After years of consistent double-digit revenue increases, the momentum has faded. In the first quarter of fiscal 2026, revenues rose just 7.7% from a year ago, and non-GAAP earnings per share (EPS) grew by only 5.7%.
This slowdown reflects cautious enterprise spending amid economic uncertainty and geopolitical pressures. Analysts anticipate that this trend will persist, with mid-to-high single-digit growth expected for fiscal 2026 and 2027.
The impact is also visible in profit forecasts. Salesforce's EPS is now expected to witness a CAGR of 12.9% over the next five years, a big drop from the 27.8% CAGR it posted over the previous five years.
This changing growth profile shows how businesses are adjusting their IT budgets. Instead of large digital transformation projects, many are opting for smaller, lower-risk investments. For Salesforce, this means it has to adapt its strategy to stay competitive and relevant.
Salesforce's Low Valuation: Is It a Trap?
Looking at Salesforce's earnings multiple, the stock looks cheap. Salesforce currently trades at a forward 12-month price-to-earnings (P/E) multiple of 20.08, significantly lower than the sector's average of 28.15.
The stock also trades at a lower P/E multiple compared with its top peers, including SAP, Oracle and Microsoft. At present, SAP, Oracle and Microsoft have P/E multiples of 38.32, 36.17 and 33.42, respectively.
With CRM's discounted valuation, investors might be considering buying the stock. However, considering the ongoing challenges related to its slowing sales growth, the lucrative valuations could be a value trap for investors. The slump in its share price and discounted valuation reflects the company's dismal growth outlook.
Conclusion: Sell CRM Stock for Now
Salesforce is no longer the growth powerhouse it once was. The slowdown in revenue and earnings growth, combined with a valuation that may be more of a warning sign than an opportunity, suggests limited upside ahead. Until the company can prove it has a plan to return to stronger growth, it's better to step aside and look for better opportunities in the broader tech sector.
Salesforce carries a Zacks Rank #4 (Sell) at present.
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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