Several enterprise software stocks, including Salesforce (NYSE: NYSE:CRM), Unity Software, and Asana, experienced a downgrade by Piper Sandler analyst Brent Bracelin today. The downgrade was attributed to five risks: inflated 2024 estimates, an "airpocket" risk due to AI focus, September downturn data, stringent valuations, and uncertain investor sentiment.
Salesforce, a recognized leader in the CRM market with historical annual revenue growth exceeding 20%, faced share volatility today. It was marked by an initial drop of 2.5% followed by a rally. The downgrade to a neutral rating from overweight is based on anticipated slower growth. Despite the company's recovery from the sharp sell-off in 2022, it remains 33% off its all-time high. Its growth rate has been reduced to about 11% due to weak macroeconomic conditions, which were the primary driver behind last year's stock depreciation.
Unity Software was downgraded due to a developer issue affecting its 2024 ad growth forecast. Asana was moved to underweight from neutral over renewal concerns. Alteryx (NYSE:AYX) faced a downgrade over concerns about its 2024 recovery. Matterport was moved to neutral from overweight due to overly optimistic acceleration forecasts for 2024.
All these stocks experienced a pre-market drop today. In addition, Piper Sandler adjusted estimates and targets downward for 16 additional enterprise software stocks. Despite these downgrades, Salesforce still retains a BUY rating from Seeking Alpha.
The downgrades are driven by execution and M&A risks and uncertainty in AI monetization for Salesforce. For Unity Software, the downgrade is linked to a developer snafu affecting its 2024 ad growth forecast. Asana's downgrade is due to renewal concerns while Alteryx's downgrade is over concerns about its 2024 recovery.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.