Salesforce (CRM) reported 3Q22 earnings for the quarter ended October 31 this afternoon and their results support my contention that corporate earnings are rolling over and we will have a recession next year.
A reliable 20+ percent top line grower for years CRM’s 3Q22 revenue growth slowed to 14%. More importantly they guided 4Q22 revenue growth to only 8-10%. Clearly something is happening to CRM’s business and I would argue that it’s the slowing macroeconomy as all the Fed’s tightening continues to work its way through the system.
CRM is guiding FY23 EPS to $4.92-$4.94 and the stock closed the after hours down 7% at about $149. If you do the math that’s a PE on current year earnings of 30x. In other words CRM is far from cheap and if I’m right that a recession and earnings contraction are coming next year the stock has further to fall. I’d argue that CRM is quite representative in this sense and that stocks still have another leg down in 2023 as the bear market marches on.