Shares of Salesforce continue to fall after company provides light guidance

Key Points
  • Shares of Salesforce dropped more than 5% Friday before closing down 3.4%. 
  • The company earlier warned that guidance for the full fiscal year was softer than what analysts had expected.
  • Some analysts view the guidance cut as conservative.

In this article

Salesforce cofounder and co-CEO Marc Benioff speaks during the grand opening of the Salesforce Tower, the tallest building in San Francisco, Calif., Tuesday, May 22, 2018.
Karl Mondon | Bay Area News Group | Getty Images

Shares of Salesforce continued to drop Friday on the company's fiscal first-quarter earnings report that issued lighter-than-expected guidance for the year. The company's stock closed 3.4% lower, as analysts weighed the impact Covid-19 would have on the company.  

But some analysts view the guidance cut as conservative, giving it room to beat, with Mizuho Securities noting that Salesforce continues to be one of its top picks. 

"This should fuel bear concerns about scaling margins longer-term, which is admittedly hard to refute. That said, we suspect that the cut (which assumes little improvement in IT demand this year) is likely conservative, setting the table for better news as the year progresses," Raymond James analysts wrote in a note to clients Friday. 

Salesforce said Thursday afternoon that it expects 66 cents to 67 cents in adjusted earnings per share and $4.89 billion to $4.90 billion in revenue in the fiscal second quarter. Analysts polled by Refinitiv had expected 75 cents in adjusted earnings per share and $5.03 billion in revenue, though comparing results with estimates is not straightforward given the effects of the coronavirus pandemic. 

For the full fiscal year Salesforce sees $2.93 to $2.95 in adjusted earnings per share on about $20 billion in revenue, implying 17% revenue growth. Analysts polled by Refinitiv were looking for $3.09 in adjusted earnings per share on revenue of $20.73 billion.

"This has been such a challenging quarter," CEO Marc Benioff told CNBC's Jim Cramer after the company reported earnings, without providing more context when asked about the light forecast.

— CNBC's Jordan Novet contributed to this report. 

Subscribe to CNBC on YouTube.

Salesforce CEO Marc Benioff on landing a new contract with AT&T