What happened
Shares of Salesforce (CRM +1.47%) were down 1.4% today as of market close, well below the 0.5% gain for the S&P 500 and the 0.4% gain for the Dow Jones Industrial Average (of which Salesforce is a part).
The whole week wasn't great for the cloud-based enterprise software leader (shares fell 3.5% the last five trading days), and its peer Adobe (ADBE +0.32%) is a likely scapegoat.
Image source: Getty Images.
So what
Adobe released its Q1 fiscal 2022 earnings report this past week (for the three-month period ended March 4, 2022), and revenue and adjusted earnings were in line with expectations. Sales were up 17% year over year when excluding the extra week during the same period in 2021, and adjusted earnings per share were up 7%. However, for Q2, Adobe said revenue will be up only 13% year over year, and adjusted earnings per share up only about 9%. The company attributed the slowdown to its halting sales to Russia.
But what's that to Salesforce? Adobe and Salesforce are both digital transformation companies, helping enterprises update their operations for a new era of computing dominated by the cloud. If Adobe is facing a cool off in its growth trajectory, a similar story might be brewing for Salesforce as well. Thus the stock trading in sympathy with the lackluster Adobe outlook this week.
NYSE: CRM
Key Data Points
Now what
It is worth noting, however, that Salesforce raised its own growth expectations during the last earnings call at the beginning of March -- a couple of weeks after Russia started its invasion of Ukraine. Salesforce expects current year revenue to be up about 21%.
Salesforce stock remains over 30% off of all-time highs and currently trades for 39 times trailing-12-month free cash flow. With revenue growth staying above 20% and profit margins on the rise, long-term shareholders have little to worry about after a ho-hum week.
