Salesforce Plunges Amid Sluggish Revenue Outlook
Key Takeaways
- The S&P 500 slid 0.6% on Thursday, May 30, 2024, as underwhelming earnings results weighed on the tech sector and interest rate concerns persisted.
- Shares of Salesforce plunged after the CRM software provider posted lower-than-expected quarterly revenues and forecast lackluster sales growth.
- HP shares soared after the computer hardware maker beat sales estimates and highlighted opportunities from AI-powered PCs.
Major U.S. equities indexes fell as underwhelming earnings from the tech sector and intensifying interest rate speculation weighed on stock markets.
The S&P 500 lost 0.6%, marking its second straight day in negative territory following an essentially flat performance to open the shortened trading week. The Nasdaq dropped 1.1%, receding further below the record highs of the tech-heavy index on Tuesday. The Dow shed more than 300 points for the second consecutive session, ending 0.9% lower.
The weakest performance in the S&P 500 on Thursday came from Salesforce (CRM) shares, which nosedived 19.9% after the cloud software provider’s quarterly sales came in below expectations. The customer relationship management (CRM) firm also raised concerns about the current quarter, forecasting that quarterly sales growth will fail to hit a double-digit percentage for the first time. Although Salesforce has touted artificial intelligence (AI) opportunities and shifted its focus toward boosting its bottom line, the weak sales outlook contributed to its heaviest daily percentage decline since the day after it went public in 2004.
The negative news flow from Salesforce dragged on shares of other enterprise software companies. Shares of ServiceNow (NOW), which specializes in cloud-based workflow automation tools, dropped 12.0%. Adobe (ADBE) shares fell 6.6% amid concerns its multimedia and creativity software products could also see a sales slowdown.
Hormel Foods (HRL) shares slipped 9.7% after the owner of Skippy peanut butter and other packaged foods brands reported lower-than-expected sales for its fiscal second quarter. Declines in Hormel’s retail business, which accounts for the majority of its total net sales, dragged on performance, including lower prices and volumes for whole turkeys as well as soft demand for ready-to-eat meals.
Shares of life sciences firm Agilent Technologies (A) sank 9.7% after BofA Securities trimmed its price target on the stock. Although Agilent’s management highlighted orders grew in its fiscal second quarter versus the year-ago period, previous guidance had called for a more significant pickup in orders. The company also faces challenges in its Nucleic Acid Solutions Division (NASD) and pharmaceutical instrumentation business.
Despite the underperformance from the tech sector amid concerns about software sales growth, there was at least one bright spot, as shares of computers and printer maker HP (HPQ) notched the S&P 500’s top performance, soaring 17.0% following its earnings report. Although net income fell short of forecasts, quarterly revenue topped estimates. The company expects to benefit from a boom in AI, having already announced a series of AI-powered PCs.
Best Buy (BBY) shares also took off in the wake of its latest quarterly earnings release, jumping 13.5%. Although sales for its fiscal first quarter missed expectations, the electronics retailer posted better-than-expected profits, with a boost from strong laptop and services demand as well as an increase in paid memberships.
Shares of Warner Bros Discovery (WBD) gained 5.5% as its CEO diverted attention away from ongoing negotiations to maintain its broadcasting deal with the National Basketball Association (NBA) by spotlighting the entertainment giant’s other sports assets. These include the rights to broadcast the Olympics in Europe as well as recently completed deals to air National Hockey League (NHL), Nascar, and college football events.
