Salesforce Macro Constraints are Evident – JPMorgan
2022.08.23 20:53
Salesforce (CRM) Macro Constraints are Evident – JPMorgan
By Sam Boughedda
JPMorgan released a report on its Salesforce (NYSE:CRM) Partner Survey on Tuesday, telling investors that macro constraints are evident, but underlying resilience is still tangible.
An analyst who has an Overweight rating on Salesforce, outlined four key takeaways from the survey, which were that partners finished 2% above plan on average, a downtick from last quarter’s +3.8%, most growth metrics experienced a downtick as expected, 85% of partners see lengthening sales cycles or greater deal scrutiny, and that there are a couple of measures to improve.
“Looking across the metrics, we see a sequential downtick in Perf-vs- Plan, Pace of Business, Bookings Expectations, MuleSoft/Tableau/Slack momentum, and tone of spending across Enterprise / Mid / Small Business segments. We still expect to see downticks accumulating due to the combination of inflation & rates, Fed tapering, stimulus withdrawal, recession talk, and the Russia-Ukraine war affecting business confidence. That said, the magnitude of deterioration appears manageable for now, and less severe than at the onset of the pandemic, though potentially softening in the coming quarters,” said the analyst.
“Despite macro constraints, partners’ expected CY22 practice growth rates actually up-ticked a point from 16% to 17%, while the expected runway for Salesforce to grow 15-20%+ also recovered from an uncharacteristic drop last quarter to a normal-looking level of 3.8 years,” he added.
On lengthening sales cycles, the analyst said a large majority of partners are sensing pockets of elongation, with comments such as “our pipeline has widened, but close rate has slowed significantly” and “…people tucking in and holding tight to see what happens.”
“One partner sees ‘projects that were almost immediate are now 6 to 18 months from initial contact to actual contract signing’, this behavior seems more pronounced in certain verticals such as Financial Services and offset by strength in Healthcare,” said the analyst.
