Salesforce (NYSE: CRM) stock price made a bullish breakout last week as hedge funds circled the embattled company. The shares popped to a high of $167.40, the highest point since August 26 of 2022. It moved above the falling wedge pattern that I identified last week. Salesforce, after rising by 32% in 2022, has outperformed the Nasdaq 100 index.
Salesforce, the giant provider of CRM solutions, has been a bruised company in the past few months. It has been one of the worst-performing Dow Jones index constituents in the past few years and its valuation metrics have lagged behind the other SAAS giants like Microsoft and Adobe.
This performance is mostly because the company’s core business has slowed down dramatically in the past few years. Besides, most companies that require a CRM solution already have one. And in addition to Salesforce, there are other alternatives like Zoho, Microsoft, Oracle, and SugarCRM. Microsoft has a highly-popular dynamics product while Oracle CRM has a small but growing CRM business.
Therefore, facing significant headwinds, Salesforce has embarked on an acquisition spree that has left it heavily in debt. Some of the most important recent acquisitions include Mulesof, Slack, Demandware, and Quip. Some analysts have questioned the viability of the growth via acquisition model.
Salesforce stock price has rallied after the company announced a new slate of directors last week. That decision was meant to prevent Elliot Management from nominating its slate of directors in the coming months.
Salesforce has also taken measures to turn its business around. For example, it has paused on its acquisition spree and embarked on a cost-cutting program that will see 10% of its workforce exit the company.
In my report on Salesforce last week, I noted that it was preparing a bullish breakout even before Elliot Management took a stake in the company. It was already forming a falling wedge pattern, which is one of the most accurate bullish reversal patterns.
Now, on the 4H chart, the stock has broken out above the upper side of the wedge pattern and retested the important resistance point at $167.40. This was an important level since it was where it formed a triple-top pattern between October and November last year. The stock has also moved above the 25-day and 50-day moving averages while the MACD has moved above the neutral point.
Therefore, the outlook of the Salesforce stock price is bullish, with the next reference level to watch being at $194.16, the highest point on August 8. This price is about 18% above the current level. However, a break below the important support level at $152 will invalidate the bullish view.
This post was last modified on Jan 30, 2023, 04:57 GMT 04:57