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Salesforce (CRM) shares have decreased by 5.3% in one day. The sell-off comes amidst a broader decline in the technology indices in recent days and also due to some insider share sales. The stock seems fairly priced right now, but historical trends indicate that purchasing during dips could be beneficial. Take into account the following information: Size: Salesforce is a $229 billion company with $40 billion in revenue, currently trading at $239.27. Fundamentals: Revenue growth over the last 12 months is 8.3%, with an operating margin of 21.2%. Liquidity: The company has a Debt to Equity ratio of 0.05 and a Cash to Assets ratio of 0.16. Valuation: Salesforce stock is presently trading at a P/E multiple of 34.3 and a P/EBIT multiple of 27.3. It has returned a median of 60.5% within a year after significant dips since 2010. Refer to CRM Dip Buy Analysis. While we prefer to buy during dips if the fundamentals are sound – for CRM, see Buy or Sell CRM Stock – we are cautious about falling knives. More specifically, it is important to determine if, in the event of a substantial decline (20-30%) to around $167, we would be able to maintain our position in the stock. What’s the worst-case scenario? We refer to this as downturn resilience. Interestingly, the stock experienced a slightly better impact than the S&P 500 index during various economic downturns. We gauge this by assessing (a) the extent of the stock's decline and (b) the speed of its recovery. Investing in a single stock can be risky, but there is considerable value in a broader, diversified strategy. Let’s have a quiz: Over the last 5 years, which index do you believe the Trefis High Quality Portfolio outperformed — the S&P 500, the S&P 1500 Equal Weighted, or both? You might be surprised by the answer. Discover how our advisory framework assists in shifting the odds in your favor. Here are the specifics. However, first a brief background: CRM offers customer relationship management technology and a platform that supports connected experiences across industries, including financial services, healthcare, and manufacturing worldwide. 2022 Inflation Shock CRM stock decreased by 58.6% from a high of $309.96 on November 8, 2021, to $128.27 on December 16, 2022, compared to a peak-to-trough drop of 25.4% for the S&P 500. Nonetheless, the stock fully rebounded to its pre-crisis peak by March 1, 2024. Since that recovery, the stock surged to a peak of $367.87 on December 4, 2024, and is currently trading at $239.27. MORE FOR YOU 2020 Covid Pandemic CRM stock declined by 35.7% from a high of $193.36 on February 20, 2020, to $124.30 on March 16, 2020, versus a peak-to-trough decline of 33.9% for the S&P 500. However, the stock fully recovered to its pre-crisis peak by July 6, 2020. 2018 Correction CRM stock dropped by 24.8% from a high of $160.43 on September 27, 2018, to $120.67 on November 20, 2018, compared to a peak-to-trough drop of 19.8% for the S&P 500. Nonetheless, the stock fully recovered to its pre-crisis peak by February 12, 2019. 2008 Global Financial Crisis CRM stock plunged 70.5% from a high of $18.61 on June 23, 2008, to $5.49 on November 19, 2008, compared to a peak-to-trough decline of 56.8% for the S&P 500. Regardless, the stock fully bounced back to its pre-crisis peak by December 29, 2009. It is vital to consider how low CRM could potentially decline during a downturn. Additionally, you should evaluate how the stock performed in comparison to the Trefis High Quality (HQ) Portfolio, which consists of 30 stocks and has consistently outperformed its benchmark, including the S&P 500, S&P mid-cap, and Russell 2000 indices. What accounts for this? Generally, HQ Portfolio stocks have yielded superior returns with less risk in comparison to the benchmark index; resulting in a smoother investment journey, as illustrated in HQ Portfolio performance metrics.
