Salesforce was on the move again Friday, rallying 1% and looking to close out the week with an 8% gain.
The stock, the best performer on the Dow this month, surged Thursday after the company released its full-year sales guidance.
Salesforce increased its revenue forecast for fiscal 2022 ending January to $26.35 billion from $26.3 billion. Its fiscal 2023 outlook was also raised.
Quint Tatro, president of Joule Financial, thinks the rally in its shares may be overdone.
“They raised guidance [less than] 1%. Keep in mind, they spent $28 billion for Slack, and I think that they were going to attribute, or they estimated, that that would bring $6 billion in new revenue to the company. So obviously some of that’s baked in, but I just think that the [stock move] is a little bit ridiculous for the raise that we’re seeing,” Tatro told CNBC’s “Trading Nation” on Thursday.
“I think it goes to show how poorly positioned traders are and either they’re covering or buying up in a frenzy. I think at 60 times forward earnings, this is a stock that is not something I can get behind. And if you’re lucky enough to be in it, great, enjoy the run, but I would not advise chasing this name,” said Tatro.
Katie Stockton, founder of Fairlead Strategies, is also hesitant on Salesforce after its surge.
“This gap up does suggest that perhaps it’s going to tire out. Somewhat counterintuitively, when you do see gaps up after nice prolonged up moves, they tend to be somewhat exhaustive. For Salesforce, in particular, it does have some resistance leftover from the 2020 highs — that’s between about $284 and $285,” Stockton said during the same segment.
Instead, there’s another software stock that has broken out recently that looks more favorable to Stockton.
“We do prefer the move in BlackBerry that has gapped up after a decline, and when you see the gaps up following declines, they are more often than not breakaway gaps,” said Stockton. “It does have strong support, and this gap is more promising, in my opinion.”
BlackBerry shares are up 5% this week. The company on Wednesday reported better-than-expected quarterly revenue thanks to strength in its cybersecurity segment.
