This post was originally published on this site
Salesforce.com Inc. and Adobe Inc. are leading software stocks lower Wednesday after an analyst voiced concern about the growth outlooks for both companies.
After speaking with information-technology executives and service partners of the companies, UBS analyst Karl Keirstead was left with the sense that customers may have “pulled forward” their spending in 2020 and 2021, which could hurt 2022 growth rates. He downgraded Salesforce
CRM,
and Adobe
ADBE,
shares to neutral from buy.
Salesforce shares are off 5.2% in Wednesday trading, enough to pace the Dow Jones Industrial Average’s
DJIA,
decliners, while Adobe shares are down 4.1%. The iShares Expanded Tech-Software Sector ETF
IGV,
is down 1.8%.
“While many customers are planning similar levels of front-office spending growth in 2022, many others are already beginning to moderate their spend,” Keirstead wrote. “It seems likely that Salesforce’s organic growth will moderate in 2022, which may outweigh the positive associated with the improving margin narrative.”
Keirstead also highlighted the sharp deceleration for Salesforce’s MuleSoft business seen during the fiscal third quarter. His conversations with industry players indicated to him that Salesforce’s trouble with MuleSoft is not something the company “can course-correct within a few months,” as customers pointed to issues with pricing, technical limitations, and the competitive landscape.
“This feedback suggests to us that MuleSoft might be a longer turnaround than just a quarter or two,” he wrote.
As for Adobe, Keirstead discussed a shift in how companies are now looking at their marketing-tech budgets. Many of the customers he talked to spent on “foundational” marketing-technology products during 2021 but now are spending on tech that “enables first-party customer data analytics, personalization and targeted marketing.”
The company may not be as well positioned for this change in spending trends, in Keirstead’s view.
“Adobe is lagging behind several niche rivals in these emerging spending categories,” he wrote. And customers in general seem to be receptive to working with smaller companies, judging by his recent industry conversations.
