Salesforce (NYSE:CRM) shares fell Wednesday after Bernstein downgraded the shares, saying they’re falling into a “growth purgatory” and could have difficulty climbing out of it.
Analyst Mark Moerdler lowered his rating on Salesforce to underperform from market perform and trimmed the price target to $119 from $134, noting that even though the company guided towards $50B in revenue for fiscal 2026, there is the need for further margin improvements.
"...[P]ressure has increased for larger margin improvements, while growth has continued to slow and the company has missed expectations," Moerdler wrote in a note to clients.
Moerdler added that the recent layoffs , which will impact roughly 10% of the company, is likely to "only drive additional deceleration in growth." Additionally, the accompanying improvements in margins may not be felt right away and be less than Wall Street is expecting.
"Comparing the valuation of Salesforce against peers we find that Salesforce is overpriced, as it has a similar growth rate to peers but lower margins and lower quality earnings," Moerdler added.
As part of the layoffs, Salesforce CEO Marc Benioff said the company had hired "too many people," adding that he took responsibility for that .
Analysts are largely bullish on Salesforce. It has a hold rating from Seeking Alpha authors , while Wall Street analysts rate it a Buy .
Conversely, Seeking Alpha's quant system, which consistently beats the market, rates CRM a Strong Buy.
CRM shares sank $2.04, or 1.4%, in the early going to $145.40
