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Salesforce falls 11% after confirming $27.7 billion Slack acquisition and forecasting slower growth

Ben Winck   

Salesforce falls 11% after confirming $27.7 billion Slack acquisition and forecasting slower growth
  • Salesforce shares dipped as much as 10.7% on Wednesday after the company confirmed its $27.7 billion purchase of Slack and guided for its slowest revenue growth since 2009.
  • The Slack deal's price tag reflects a 55% premium to where the firm's shares traded before news of the acquisition broke.
  • Though Salesforce's third-quarter earnings beat estimates, its guidance for fourth-quarter revenue marked a weakening pace of year-over-year growth.
  • Watch Salesforce trade live here.

Salesforce slipped as much as 10.7% on Wednesday after confirming its acquisition of Slack and reporting soft forward guidance.

The workspace-software company announced on Tuesday afternoon that it would buy Slack for $27.7 billion. News of the deal emerged on November 25 and lifted Slack shares as much as 49% through the following trading sessions.

The acquisition is easily Salesforce's largest and positions the firm to compete with Microsoft in a new software category. The deal's price tag reflects a 55% premium to Slack's stock price before news of the takeover broke.

Investors also balked at a moderating growth forecast for the current quarter. Fourth-quarter revenue guidance calls for Salesforce's slowest quarter of year-over-year growth since 2009. Current-quarter profit guidance similarly surprised to the downside.

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Here are the key numbers:

  • Revenue: $5.4 billion, versus the $5.3 billion estimate
  • Adjusted earnings per share: $1.74, versus the $0.75 estimate
  • Q4 revenue: $5.67 billion to $5.68 billion, versus the $5.63 billion estimate
  • Q4 EPS: $0.73 to $0.74, versus the $0.86 estimate

"No other major enterprise software company is growing at this rate," CEO Marc Benioff said. "We're rapidly moving to an all-digital world, where work happens wherever people are."

The company said its fourth-quarter income would also be hit by a one-time charge of $80 million to $100 million linked to office shuffling. Mark Hawkins, Salesforce's chief financial officer, told analysts the company decided to consolidate some of its offices and sublease locations.

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Other work-from-home plays have fallen as they've guided for slower growth through the end of 2020. Zoom Video sank as much as 16% on Tuesday after the firm's forecasts for weaker revenue growth led investors to question the sustainability of its year-to-date rally.

With coronavirus vaccines approaching distribution and economists cautiously hoping for a 2021 recovery, some of the market's most popular quarantine stocks are poised to face new pressure.

Salesforce closed at $241.35 per share on Tuesday, up 49% year-to-date. The company has 38 "buy" ratings, three "hold" ratings, and one "sell" rating from analysts.

Now read more markets coverage from Markets Insider and Business Insider:

Shelby Osborne achieved financial freedom using a unique twist on a classic real-estate investment strategy. Here's how she built a portfolio of 53 units, starting in her early 20s.

US banks weathered a record plunge in lending income as COVID-19 hit profits

US companies added 307,000 jobs in November, fewer than economist forecasts, ADP says

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