Enterprise software giant Salesforce (CRM) experienced a significant drop in its shares after announcing its lowest quarterly revenue growth forecast on record. The weak forecast raised concerns about high interest rates and competition from rivals in the AI space, which may be impacting demand for the company's cloud-based software. Salesforce's shares sank 16% before the bell on Thursday, and at least ten brokerages lowered their price targets on the stock following the results. This is the first time since 2006 that Salesforce has reported quarterly revenue below expectations. Some brokerages also warned that the forecast indicated a further slowdown in software demand in April, as the US economy showed signs of cooling [41bf987b].
Despite the drop in share price, Jim Cramer disagrees with the downgrade and still sees Salesforce as a good investment opportunity. He believes the downgrade is overdone and highlights Salesforce's strong position in sales growth and profitability. The company has implemented cost cuts and demonstrated improved profitability in recent quarters. Salesforce's price hikes and the rollout of new AI tools are expected to sustain top-line growth [9d7ed1a7].
Meanwhile, Snowflake Inc. (SNOW), a competitor in the AI space, has been experiencing positive growth and product innovation. The company beat expectations on both the top and bottom-line this quarter, with its core business remaining strong. Snowflake's new CEO, Sridhar Ramaswamy, has prioritized customer engagement, execution, and product innovation. The number of customers contributing more than $1 million in product revenue grew 30% from the prior year. Snowflake raised its product revenue guidance for FY2025 and lowered margin guidance due to investment in AI. The company has $4.5 billion in cash and investments on its balance sheet. Snowflake expects product revenues between $805 million and $810 million for FY2Q25. The company is investing in AI initiatives and plans to acquire technology assets and hire key employees from Truera. Snowflake's new CEO is focused on driving execution, customer engagement, and product delivery. The company is on track to bring enterprise AI to its customers and accelerate innovation. Snowflake's net retention rate for FY1Q25 was 128%. The company has seen impressive growth in the number of customers contributing more than $1 million in product revenue. Snowflake has been hiring aggressively to accelerate product innovation. The recent cyber threat attack did not impact the company's systems, but Snowflake plans to enforce multi-factor authentication for all customers. The author reiterates an intrinsic value of $229 for Snowflake and maintains a 1-year price target of $245 and a 3-year price target of $346. Snowflake's recent results and product innovation indicate a positive outlook, although there are near-term risks related to AI investments and the cyber threat attack [f720d173] [41bf987b].
Cloudflare Inc. (NET), another player in the AI space, is expanding its generative AI GPU capacity to meet demand. Cloudflare's cloud-based network services enhance internet application protection and operational speed without additional hardware or software. The company maintains its Buy rating with a stock price target of $124.00. UBS upgraded Cloudflare's stock from Sell to Neutral with a price target of $82, while Goldman Sachs maintained a 'sell' rating with a $68 target. Citi maintained a neutral stance with a $90 price target. TD Cowen reiterated a buy rating and a $110 target, and RBC Capital reduced its price target to $90 from $108. Stifel maintained its hold rating but lowered the stock's price target from $90 to $80. Cloudflare has a gross profit margin of 76.78% and a revenue growth of 31.51% in the last twelve months. The company is expected to become profitable this year. Cloudflare is positioned as a noteworthy company in the cloud services industry [449cd090].