Salesforce.com Inc. shares tumbled round 6% on Wednesday, persevering with a latest stretch of losses which have pulled the software program big’s inventory to the bottom ranges in months.
The inventory is down round 7% this week and has fallen roughly 25% from its 52-week excessive, FactSet information present.
UBS Group AG analysts on Tuesday downgraded Salesforce shares to a “impartial” ranking from a “purchase” and lowered their worth goal on the inventory to $265, decrease than the $315 goal analysts beforehand held on the shares. The shares, which lately traded round $232, have been on monitor to shut at their lowest degree since June.
The analysts stated they anticipated the corporate’s progress to mood this yr and that some Salesforce clients had already began to tug again on spending. The corporate stated in November that it anticipated fiscal 2023 gross sales progress of about 20%, down from about 24% for fiscal 2022, which ends this month.
“It appears probably that Salesforce’s natural progress will reasonable in 2022,” wrote UBS analysts in a notice to purchasers. “Given the danger of extra modest progress fee upside in 2022, we conclude that these multiples are cheap however not compelling even with an enhancing margin story.”
Of the 17 software program corporations throughout the S&P 500’s data know-how sector, 14 have fallen this week. The broader market has kicked off the yr with positive factors.
UBS additionally downgraded Adobe Inc. shares this week, forecasting decrease progress in 2022. Many corporations boosted software program spending in 2021, the analysts stated, however would probably reasonable their funding in Salesforce and Adobe merchandise within the coming yr.
Adobe shares have fallen 7% this week. Intuit Inc. has dropped roughly 6%. The S&P 500 hit a file within the first few buying and selling classes of the yr and has added 0.4% this week.
The swings in Salesforce and different software program corporations coincide with broader volatility in know-how shares. Traders have fled the sector to start out the yr, piling into shares of cyclical corporations that may profit from an enhancing economic system. The S&P 500’s power and monetary sectors have outperformed this week, whereas tech has lagged behind.
The Nasdaq Composite has trailed the S&P 500 to start out the yr. It has fallen 1.5% within the first buying and selling classes of the yr, whereas the broad stock-market index has added 0.2%. That continues a pattern from final yr, when the S&P 500 outperformed the Nasdaq by 5½ share factors, the most important yearly outperformance since 2002.
Dan Morgan, a portfolio supervisor at Synovus Belief Co., stated this outperformance signaled that individuals have been rising extra cautious about which tech shares they’re holding, particularly since earnings progress for tech will probably reasonable in 2022.
“The outperformance within the S&P 500 to the Nasdaq alerts to me a flight to high quality to confirmed, time-tested enterprise fashions within the tech area and broader industries, and a rotation out of extra aggressive companies,” Mr. Morgan stated.
Write to Gunjan Banerji at Gunjan.Banerji@wsj.com
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