Salesforce stock price has pulled back in the past few months. After peaking at $366 earlier this year, it has plunged to the current $245, and formed a risky pattern that points to a strong bearish breakout soon.
Salesforce stock price technical analysis
The weekly chart shows that the CRM stock price peaked at $366, representing a 193% increase from its lowest level in 2023.
Its performance since then has not been all that strong as it has plunged by 33%, moving into a bear market. This plunge makes it one of the top laggards in the Dow Jones Index, which is now hovering near its all-time high.
Salesforce stock price has plunged below the 50-week and 100-week Exponential Moving Averages (EMA), which are about to form a bearish crossover pattern. Such a mini-death cross pattern would be risky and point to more downside.
The most notable bearish catalyst is that it has formed a head-and-shoulders pattern, which often lead to a strong breakdown. The pattern’ head is at $366, while the right and left shoulders are at $300. It has formed a near-perfect neckline at $229, its lowest level in June last year and April this year.
The profit target in a head-and-shoulders pattern is estimated by first measuring the height, which is about 37%. One then measures the same distance from the neckline, meaning that it may plunge to $143.
The bearish CRM stock price forecast will become invalid if it rises above the right shoulder at $300.
CRM stock price chart | Source: TradingView
AI growth concerns remain
The main reason for the ongoing Salesforce stock outlook is that its business is no longer the growth machine it was in the past. Also, investors are concerned about its business’ investments in artificial intelligence (AI) agents and whether they will pay off.
The most recent results showed that Salesforce’s revenue rose by 8% in the first quarter to $9.8 billion. Most of this revenue, or about $9.3 billion, was in its subscription and support. Salesforce’s remaining performance obligations rose by 12% to $29.6 billion.
All its businesses did well, with its platform & other, which include Slack, rising by 14% to $2 billion. Sales and service rose by 7% each, while integration and marketing jumped by 10% and 4%, respectively.
Analysts and Salesforce itself expect its business to experience single-digit growth this year. The company sees its revenue rising by between 8% and 9% to between $41 billion and $41.3 billion. While this growth is good, it means that its AI agents are not providing the explosive growth that analysts were expecting.
Salesforce stock price is also at risk as the company continues its approach of growth through acquisitions. It recently spent $8 billion to buy Informatica, a company that offers AI-powered cloud data management solutions to enterprises.
Read more: Salesforce could buy Informatica: good news for INFA, bad for CRM
Salesforce has executed other large acquisitions before as its core CRM business slowed. It bought Slack in a $27.7 billion deal, Tableau for $15.7 billion, and Mulesoft for $6.5 billion.
There are also signs that the CRM stock price is highly overbought. As a SaaS company, the best approach is to use the rule of 40 by adding its revenue growth and its profit margin.
In this case, its forward revenue growth metric is about 8%, while its estimated operating margin is 21.6%, giving it a metric of 29.6%, lower than the key point at 40.
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