Historically Rough Month for Salesforce Stock Kicks Off

The equity tends to underperform in December

Digital Content Manager
Dec 1, 2021 at 10:48 AM
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Dow-member Salesforce.com, inc. (NYSE:CRM) shared a third-quarter earnings and revenue beat, but its stock is still dropping after the firm also issued current-quarter guidance that missed analysts' estimates. Salesforce's revenue outlook also fell well below estimates, with the company eyeing heightened competition in the cloud sector. The equity was last seen down 4.6% at $272, to trade at its lowest level since mid-October. 

Some analysts are brushing off some of the gloom and doom CRM's earnings seem to have invoked, pointing to problems with MuleSoft, a software firm acquired by Salesforce three years ago, suggesting these issues don't pose any major long-term concern. So far, Truist Securities and Bernstein have lifted their price targets, to $330 and $295, respectively, while Mizuho cut its price estimate to $350. 

The majority of analysts heading into today's session were overwhelmingly optimistic. Of the 28 in coverage, just three said "hold," compared to 25 "buy" or better ratings. Plus, the 12-month consensus price target of $325.71 is a solid 20.9% premium to current levels. 

Mizuho's adjusted price objective still sits well above CRM's recent record high of $311.75, touched on Nov. 9. The equity saw a sizeable pullback from the area late last month, though support at the $284 level and 60-day moving average kept some of these losses in check. Though CRM has breached these areas today, it could find some support just below at the 120-day moving average. 

Even with this potential support in place, investors should note that CRM has been the victim of some end-of-the-year headwinds in the past. The equity just popped up on Schaeffer's Senior Quantitative Analyst Rocky White's list of the 25 worst performing stocks in December, going back 10 years. According to this data, Salesforce stock has seen only two positive monthly returns in that time period, and averaged a 2.5% drop. A similar move would put the stock just above the $265.20 level. What's more, this accounts for the seventh-biggest drop on the list, and makes CRM the worst performer among the Dow components. 

worst of december new

A quick look at some of the options activity happening early on in the session shows bulls and bears neck and neck, with 46,00 calls and 49,000 puts across the tape so far -- 13 times the intraday average. The weekly 12/3 270-strike put is the most popular, followed by the 260-strike put in the same series, with positions being opened at both. 

 

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