Salesforce is open to big acquisitions, but analysts are concerned

The last time Salesforce (CRM) stock saw a one-day decline of this magnitude, George W. Bush was still in the middle of his first term as president.

On Thursday, Salesforce’s fiscal first-quarter earnings results and commentary sent the company’s shares down 20%, marking the worst day for its stock since July 2004. The decline weighed on the Dow Jones Industrial Average (^DJI) during the trading session following the forecast Salesforce slowing down sales. growth in the current quarter.

On an earnings call, top executives at the cloud software provider noted “measured purchasing behavior,” with “extended deal cycles, deal compression, and a high degree of budget control.”

RBC analyst Rishi Jaluria called the results “truly hit and miss.”

“We live in difficult conditions,” Jaluria told Yahoo Finance. “I know there were some green shoots and Marc Benioff sounded very optimistic about the fourth quarter print, but the macro environment for software is very, very difficult right now and I think that’s very clear.”

As momentum fades, some Wall Street analysts fear Salesforce will repeat its acquisition history to usher in more growth.

“It’s clear that if you look at the investment community, they don’t want any large-scale mergers and acquisitions within Salesforce,” CFRA analyst Angelo Zino told Yahoo Finance. “But if you look at some of the speculation that has been emerging in recent months… it appears that Salesforce may be looking to M&A to revitalize the company’s growth.”

“We’ll see,” Zino added, “but I think it’s definitely a risk for investors who want the name.”

The San Francisco-based company’s previous acquisitions include the $27 billion acquisition of Slack; Tableau for $15 billion; and MuleSoft for $6 billion – to name just a few of the notable announcements over the past decade.

During the earnings call, Salesforce CEO Marc Benioff noted that the company is cautiously open to another large-scale acquisition, a change from last year when he said the company was putting billions of dollars worth of deals on hold.

“We’re always wondering what the next level of innovation will be,” Benioff said Wednesday. “But as we promised, if we consider a large-scale acquisition, we will make sure it is non-dilutive to our customers, is accretive and… has the right metrics. We will also be quick to walk away from things we don’t fully trust or believe in, or in any company.”

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In February, Salesforce acquired Spiff, a payroll management software company, for $419 million. However, the company also ended speculation that it would acquire cloud data platform Informatica.

The broader growth push comes after companies announced massive investments in artificial intelligence, raising concerns that Salesforce could be left behind in the AI ​​boom.

“I think investors don’t want Salesforce to buy revenue growth, and investors don’t want Salesforce to buy EBITDA,” Jaluria said. “So if they were to make a big acquisition, I think it would have to be something that made a lot of strategic sense and was very close to the core of their business.”

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