Salesforce sentiment wavers headings into Q2 earnings

• Salesforce stock trended lower the day before earnings.
• Q2 earnings will be released in Wednesday’s post-market.
• There is some uncertainty about guidance in the second half of the year.
• Nvidia earnings on Wednesday are holding back the market in the first half of the week.

Salesforce (CRM) stock pulled back 0.4% on Tuesday, a day before the customer management software maker is set to deliver second-quarter earnings. Shares of CRM were down lower at the start of the session but recovered somewhat from the early sell-off.

The Dow Jones index, of which Salesforce is a component, also sank at the start of the session before ending the day up by a hair.

The market has remained moribund at the start of the week due to widespread worries about Nvidia’s (NVDA) earnings release, which will appear simultaneously with Salesforce after market close on Wednesday.

Salesforce stock news

The vast majority of earnings revisions for Salesforce’s upcoming result have been downward, which should give many traders pause.

As it now stands, Wall Street consensus expects Salesforce to earn $2.36 in adjusted earnings per share (EPS), up 11% YoY, and $1.33 in GAAP EPS. Revenue is projected to arrive at $9.23 billion or a 7% rise above the prior year.

Citi was out with a client note arguing that the company led by Marc Benioff would easily meet the quarter’s consensus but that the share price could suffer from a poor outlook in the back half of the year.

Citi analyst Tyler Radke said that the comparisons would be difficult in coming quarters due to Salesforce’s megadeal with Amazon Web Services to sell its products on the latter’s cloud marketplace, which closed in November 2023. Additionally, the sentiment among Salesforce partners seems tepid.

Radke wrote that “partners noted a still tepid and elongated demand environment with a prioritization on budget optimization.”

Guidance given during the Q1 release in May was already weak. Wedbush Securities’ Dan Ives, however, seems less worried.

“While there is clearly still some disruption in the field, we believe overall CRM should be able to meet and potentially exceed Street expectations with some improvement in the field,” Ives wrote.

Salesforce stock chart

CRM stock has been trading within a wedge. Now that it is near the top descending trendline, a break above would likely lead to a large spike higher. The next available resistance region is the $287 to $290 range from May. Any break above $290 would signify that the current downtrend was over.

A bad earnings call would likely only send CRM back to the $240s, so the downside seems well-supported.

CRM daily stock chart