Over the past month, investors have seen the S&P 500, Dow Jones Industrial Average and Nasdaq all slide more than 30% from peak to trough. It’s been a brutal stretch as one of the most aggressive bear markets has developed following this black swan event.
It’s an ugly reminder about how quickly things can change. However, for long-term investors, it also offers a window of opportunity.
The equity market topped out on Feb. 19. Six days later, Salesforce reported better-than-expected earnings with strong guidance for the first quarter. Management even raised its full-year earnings and revenue outlook. It didn’t matter.
Despite rallying more than 21% from last week’s low, Salesforce is still down more than 28% from its highs last month. Admittedly, shares have a high valuation. But the cloud isn’t going away and the company has incredible growth. That has to equate to a bargain at some point.
Trading Salesforce Stock
Above is a weekly chart of Salesforce stock. Up aggressively from the lows just made on Friday, it’s hard to be a buyer in the $140s when shares were sub-$120 so recently.
Many investors believe that we haven’t seen the lows in the S&P 500 yet, or that if we have, we will surely retest them. After all, the coronavirus situation is bound to get worse before it gets better.
If that’s the case and investors get another shot at Salesforce stock near the 200-week moving average, long-term growth investors may want to consider taking a shot. That’s not an all-in bottom call, but rather, a suggestion for accumulating shares of a high-quality company knowing that lower prices are possible.
It’s a bit concerning that the stock so easily knifed through the 100-week moving average, an area that has been solid support over the past 18 months. If this mark is quickly reclaimed, CRM stock could see the $165 breakout level again. If instead the 100-week moving average acts as resistance, a retest of the $115 breakout level and the 200-week moving average may come to fruition.
For some investors, Salesforce will always have too high of a valuation, and that’s fine. But for growth investors, this company just reported strong results and should continue to be a long-term winner. Buying near $120 - 39% off the highs - seems like a good start.