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Today's big stories

Salesforce’s results update left investors with a lot to think about
You might want to be cautious in this stock market rally – Read Now
UK house prices continued their slide last month

Salesforce Shares Slump

What’s Going On Here?

Salesforce reported unexpectedly strong results earlier this week, but investors fretted about some bumps in the road.

What Does This Mean?

Digitization is a hot topic right now, and Salesforce hasn’t just got a finger in the pie: it’s got all ten of them in there. The firm’s wide range of products, from its flagship sales cloud software to the workplace messenger Slack, has drawn customers aplenty, even as the economy’s gone (ahem) slack. That success continued last quarter, with both revenue and profit growth beating analyst expectations – but there are signs the downturn’s begun to rock even Salesforce. Businesses are taking a leaf from the Jungle Book right now, spending on nothing but the bare necessities, which could be why the firm says it’s facing “intense customer scrutiny”. That's reflected in the numbers: the company's 14% revenue growth last quarter versus the same time the year before was the first time the metric’s ever come in under 20%. That, plus a worse-than-expected revenue outlook, could explain why investors sent Salesforce’s stock down 7%.

Why Should I Care?

Zooming in: Taylor’s high-tailin’.
The sudden departure of Salesforce’s co-CEO probably didn’t reassure investors either: they ran day-to-day operations at Salesforce, and their speedy exit has raised questions about why they’re really leaving and who’s going to step into their shoes. And on an even more basic level, the co-CEO was considered quite the asset: helping invent Facebook’s like button and creating Google Maps are pretty impressive achievements, after all.

For markets: Think twice.
It’s been a dire year for the stocks of cloud software companies like Salesforce, with an index that tracks some of the biggest names in the industry dropping over 40%. But don’t rush out to grab a bargain just yet: see, a key valuation metric of the index is still well above its long-term average, and analysts reckon cloud players’ shares could drop even further as the sector’s growth slows.

You might also like: How to invest when everything is falling.

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Analyst Take

Investors Are Betting On A Dream Soft Landing

Stéphane Renevier, Analyst

The S&P 500 rallied 3% Wednesday, to end November with a 5% gain.

That followed another 8% gain in October – meaning the S&P is now down only 14% since January.

In a year when inflation broke 40-year highs and the Federal Reserve hiked interest rates more aggressively than ever to try to tame it, that’s pretty remarkable.

But it may suggest a bit of over-optimism.

That’s today’s Insight: why it might be wise to be cautious about this stock market rally.

Read or listen to the Insight here

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