Salesforce.com Stock To Recover Post Coronavirus?

by Trefis Team
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Salesforce.com’s (NYSE: CRM) stock fell about 6% between 8th March 2020 and 24th March 2020 (vs. an 18% decline in the S&P 500), and the stock is down almost 16% since 31st January after the WHO declared a global health emergency in light of the coronavirus spread (vs. about 27% decline in the S&P 500 since then).

Looking back at the 2008 financial crisis, we see CRM stock declined from levels of around $13 in October 2007 (the pre-crisis peak) to just $7 in March 2009 (as the markets bottomed out) – implying CRM’s stock lost as much as 47% from its approximate pre-crisis peak. This marked a lower drop than the broader S&P, which fell by as much as 51%.

Will Salesforce’s stock recover similarly from the coronavirus spread? We compare the performance of Salesforce against the S&P 500 in our interactive dashboard analysis, ‘2007-08 vs. 2020 Crisis Comparison: How Did Salesforce Stock Fare Compared with S&P 500?

In fact, CRM recovered strongly post the 2008 crisis, to over $18 in early 2010 – rising by 162% between March 2009 and January 2010. In comparison, the S&P bounced back by about 48% over the same period.

On Monday, 9th March, the stock market entered into a phase of extreme volatility, with two significant sell-offs on Monday and Thursday being separated by days of partial recoveries. Overall, there have been two distinct trends driving the recent sell-off: firstly, the increasing number of Coronavirus cases outside China is causing mounting concerns of a global economic slowdown; and secondly, crude oil prices plummeted by more than 20% after Saudi Arabia increased production.

CRM stock has suffered as countries around the globe are on lockdown. As industries have halted production and services, the demand for software and web services have taken a hit with people focusing solely on daily essentials and putting off any expenditure on discretionary products and services. We believe CRM’s Q1 and Q2 results will confirm this reality with a drop in both software and Web services revenues.

Salesforce’s stock has the potential to gain more than 30% if it fully recovers to pre-coronavirus crisis levels. However, the timing of the gain hinges on the broader containment of the coronavirus spread. Our dashboard forecasting US COVID-19 cases with cross-country comparisons analyzes expected recovery time-frames and possible spread. If signs of coronavirus containment aren’t clear by the last week of May when Q1 earnings are expected, it’s likely Salesforce’s stock (along with the broader market) is going to drop further when results confirm palpable reality.

Further, our dashboard -28% Coronavirus crash vs. 4 Historic crashes builds a complete macro picture. It complements our analyses of the coronavirus outbreak’s impact on a diverse set of Salesforce’s multinational peers including Amazon and Microsoft. The complete set of coronavirus impact and timing analyses is available here.

 

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