What happened

Shares of customer relationship management software giant Salesforce (CRM -2.25%) slid 2.4% through 11 a.m. ET Friday, and there's just one reason for this: Wolfe Research.

So what

A confirmed Salesforce bull for the past 10 years, Wolfe Research this morning announced it has downgraded Salesforce stock from outperform to market perform for the first time in a decade. As StreetInsider explains today, "following a Covid pull-forward" in sales, Wolfe thinks that Salesforce's business is "materially decelerating" and the company is entering a "new and difficult chapter" in its corporate life.  

New bookings this year are down 53%, says Wolfe, and revenue growth in 2023 could be in the single digits. On top of all that, management added to its own problems through multiple acquisitions of unprofitable companies such as Slack and Tableau, made at multibillion-dollar valuations. As these acquisition costs depreciate over time, they're weighing on Salesforce's profits -- currently depressed to just $306 million earned so far this year, after three straight years of Salesforce earning profits well north of $2 billion per year.

Long story short, after a decade of growth, Wolfe fears that the investment thesis for Salesforce has changed, and Salesforce is no longer quite the growth stock it once was.

Now what

Not everyone agrees with this assessment.

According to a poll conducted by S&P Global Market Intelligence, most analysts who follow Salesforce still consider the stock a buy -- and why wouldn't they? While Wolfe believes the thesis has changed, the fact is that over the past five years, Salesforce succeeded in growing its profits at an average 22% annual rate -- and most analysts expect the next five years to see that growth continue at a 20% rate.

Granted, paying 26 times free cash flow for Salesforce stock at a 20% growth rate isn't the best bargain available on the stock market today, but neither is it an unreasonable price to pay for a stock of this caliber. Then again, even Wolfe Research isn't saying investors should go out and sell Salesforce stock today -- Wolfe is only saying the other analysts are wrong to keep recommending buying Salesforce, and that investors should hold instead.

I'm inclined to agree with that assessment. I'm inclined to think that Wolfe, which has been right about Salesforce for most of the past 10 years, is right again about it today.