The Salesforce (CRM) stock price has been under pressure in the past few months as investors worry about the company’s growth. On Friday, the stock was trading at $229, which was the lowest level since June 3. It has crashed by about 26.7% from its highest point in 2021.

Sector rotation

Salesforce and other growth stocks have struggled in the past few months. A closer look at the situation shows that there is a sector rotation from growth stocks to value stocks. For example, in 2022, the tech-heavy Nasdaq 100 index has underperformed the Dow Jones and S&P 500.

The weakness of growth and software stocks like Salesforce and Adobe is mostly because of the Federal Reserve and the transition to reopening stocks.

Most growth stocks did well in 2020 as the Federal Reserve slashed interest rates and then launched a $120 billion a month quantitative easing (QE) program. In a period of easy money policies, investors are usually comfortable taking supersized risks. That explains why growth stocks and risky assets like Bitcoin did well.

At the same time, the lockdowns that happened and the transition to working from home led to a strong performance of software stocks. For example, in 2019, Salesforce made about $17 billion in total revenue. 

In 2020, amid the global pandemic, the company’s revenue jumped to over $41 billion. Its profitability also increased because the lockdowns led to substantial savings. 

Therefore, many investors believe that value stocks that underperformed during the pandemic will do well as the word reopens. These include companies in the finance and energy sector.

Salesforce growth concerns

The Salesforce stock price has also struggled as investors worry about the company’s growth prospects. In the past few years, the company’s core business of customer relations has been in a decline. Besides, most companies already have a CRM software either from Salesforce or one of its many competitors like Microsoft and Oracle.

As a result, Salesforce has invested heavily in growth through acquisitions. In 2021, the company completed the acquisition of Slack, the communication and collaboration firm. That transaction cost Salesforce about $27.7 billion.

In 2019, the company spent about $15 billion to acquire Tableau, a company that offers business intelligence services. A year before that, it acquired Mulesoft, a company that helps firms integrate applications in their ecosystem.

The company has been a leading acquirer over the years. Some of the other companies it has bought are Demandware, Quip, and ExactTarget among others. Therefore, there are concerns about whether Salesforce can grow organically without these acquisitions.

Still, analysts are bullish on the Salesforce stock price even as it has sunk into a bear territory. Most of them have a buy rating for the stock. For example, UBS analysts expect that the stock will rise to $265 while those at Jefferies, Wells Fargo, Goldman Sachs, Evercore ISI, and Credit Suisse expect that the shares will rise to above $375.

Salesforce stock price forecast

The daily chart shows that the CRM stock price has been in a bearish trend in the past few months. The stock has managed to move below the 25-day and 50-day moving averages while the Relative Strength Index (RSI) and the MACD have also dipped. It also crossed the key support level at $245, which was the lowest level on December 20th. 

Therefore, for now, the path of the least resistance for the stock is lower. That could see it drop to the key support at $200 before it becomes a buy.

CRM daily price chart