With Salesforce (NYSE:CRM) falling flat on its face after reporting its latest quarter results, plunging almost 20% in a single trading session, many investors are likely feeling that it’s about time to take profits in a broad range of tech stocks. Even the beaten-down stocks are worth taking a look.
Undoubtedly, the “Salesforce scare” caused some other enterprise software companies to sag in sympathy. Whether or not the shockwave of CRM stock’s downfall is warranted, however, remains to be seen.
My bet is that the damage from Thursday’s turbulence could be more of a long-term buying opportunity for investors willing to ride out the rough patch for tech. Undoubtedly, the tech-driven stock market rally can’t go on forever.
As rates and risk come back to center stage, though, your chance to snag some goods from the tech bargain bin stands to increase. Let’s check in with three stocks that I view as begging to be bought.
Beaten-Down Stocks with Potential: Salesforce (CRM)
Salesforce’s quarterly results were quite lacking, to say the least. But were they bad enough to justify the steep 20% Thursday plunge? Probably not. With CRM stock retreating rapidly, it’s hard not to give the battered software-as-a-service (SaaS) company another look while it’s 20% off.
Though only time will tell how CRM stock settles after one of its worst single-day crashes since the Great Financial Crisis, I would keep watch of the misunderstood firm as analysts begin to re-adjust their financial models to the downside after a rough guide.
The company’s Data Cloud offering stands out as having the potential to become a major growth driver as the enterprise becomes a tad more data-driven in the AI age.
Indeed, today’s powerful AI models make it more practical to unearth invaluable insights hidden within such datasets. Marc Benioff sees data as “the new gold” and AI models as “commodities” in the age of the fourth industrial revolution. He’s not wrong. With a robust data-driven platform in place and room to improve AI embedded in existing solutions, CRM stock is a name to hang onto for the long haul.
Adobe (ADBE)
Adobe (NASDAQ:ADBE) is a creative software innovator that I view as doing a great job of protecting its moat through the power of generative AI. Just because Adobe’s rivals have AI tools doesn’t mean Adobe’s best days are long behind it.
Personally, I find headlines are too harsh on Adobe and its AI capabilities. I view Adobe as an AI-first company, one that will not only maintain its impressive lead but expand upon it while getting users to pay more for new, impressive capabilities that AI makes possible.
After plunging an excruciating 6.6% in a single day, likely in response to Salesforce’s brutal plunge, ADBE stock is now down 30% from its 52-week peak and over 35% from its late-2021 all-time high.
While the benefits of Adobe’s AI investments won’t pay off overnight, I do view AI as a compelling catalyst that could pad profitability three years from now. At 26.6 times forward price-to-earnings (P/E), count ADBE stock as one of the capable software plays that’s in the tech bargain bin going into June 2024.
Microsoft (MSFT)
Believe it or not, Salesforce’s bad day even got the $3 trillion tech titan Microsoft (NASDAQ:MSFT) feeling quite down on Thursday. The stock cratered more than 3% alongside most other tech names. I view the plunge as pretty healthy, given the magnitude of its past-year run. At 35.9 times trailing P/E, MSFT stock is somewhat cheaper but still a heck of a lot pricier than most members of the Magnificent Seven.
At this juncture, Microsoft is probably my favorite Magnificent Seven company to pick up on weakness. Though still trading at a hefty premium versus select peers (and its own historical averages), I’d argue that investors should expect to pay more for the degree of AI exposure they’ll be granted.
Microsoft’s ChatGPT rollout may very well mark the first act of the enterprise giant’s multi-year AI growth plans.
Once MA-1, the first iteration of Microsoft’s in-house AI model, which could boast 500 billion parameters, is ready to go, it could be the new chatbot to beat. Who knows? Perhaps Windows users will be able to swap AI models at the click of a button in a few years down the road. Either way, Microsoft is responsible for shedding light on the 2023 AI boom. And it’ll probably continue leading the pack. Make the right play and grab these beaten-down stocks.
On the date of publication, Joey Frenette held shares of Salesforce and Microsoft. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
