Salesforce Surge Unlikely to Last: Analyst Downgrades to Sell

Salesforce's recent surge of 13% following its Q2 FY27 earnings report is unlikely to be sustained, according to some analysts. The company's revenue growth was driven by inorganic factors and non-recurring EPS items, rather than organic expansion.

Although the company reported that its contract-renewal-percentage-optional (cRPO) growth outpaced revenue, this acceleration may not translate into long-term benefits. Additionally, Salesforce's recent acquisitions have been multiple-dilutive, with initial return on invested capital below the cost of debt.

As a result, the analyst has downgraded their view and is locking in gains, recommending that investors wait for a clear indication of organic growth acceleration before re-entering the market. The current forward GAAP price-to-earnings ratio of 28.8x makes it an attractive time to sell.