Why Salesforce Stock Was Down Earlier This Morning

What happened

Shares of Salesforce (CRM -2.76%) were down 3.5% as of 10:16 a.m. ET on Thursday after one Wall Street analyst downgraded the stock from buy to neutral. 

Monness, Crespi, Hardt analyst Brian White believes the recent rally in the broader market is a good opportunity to move to the sidelines on the shares, as the company still faces headwinds in this downturn.

From a long-term perspective, the stock could offer tremendous value right now after already falling 41% year to date. 

So what

White’s downgrade corresponds with the general market sentiment, as the market gave back some of its recent gains this week. However, long-term investors shouldn’t be too concerned about this downgrade. Analysts tend to place more emphasis than is warranted on near-term business trends and discount a company’s position to deliver more growth over the long term, which is ultimately what influences a stock’s return.

Of course, there can also be varying opinions on Wall Street like anywhere else, as another analyst believes Salesforce could rally to over $300.

The company continued to report strong growth through the most recent quarter ending in August. Management’s full-year guidance has revenue up approximately 17% year over year, which is solid in the context of the weak operating environment. Salesforce will provide its next business update to investors on Wednesday, Nov. 30.

Now what

While taking a bearish stance on the stock, the analyst acknowledged that Salesforce is “well positioned to capitalize on digital transformation” across the economy. Indeed, Salesforce is the leading customer relationship management provider, offering a variety of cloud-based apps to help companies improve efficiency.

It’s difficult to pull the trigger on stocks when they are falling, but it’s equally challenging to ignore the stock’s value at these levels. At a price-to-sales ratio of 5.1, the stock is trading at its lowest valuation since the 2008 market crash. Of course, we know how that turned out. Salesforce delivered market-smashing returns off those lows, and it’s likely investors will see a similar outcome once the dust settles.