Salesforce Plunges, Nasdaq and Blue Chip Blues, Retail Earnings Barrage 5/30/24

David Faber (0:00)

Market Insight and Analysis. You're listening to the opening bell of CNBC's Squawk on the Street.

Carl Quintanilla (0:05)

Good Thursday morning. Welcome to Squawk on the Street. I'm Carl Quintanilla with Jim Cramer and David Faber at Post 9 of the New York Stock Exchange. Dow futures will be stung by Salesforce today, but this revised Q1 GDP down to 1.3, the lightest in two years, will take bond yields off the boil, 10 year 457 Our roadmap's gonna begin though with Salesforce weighing on stocks ahead of the open shares, plunging as the company reports weaker than expected revenue and a soft guide.

David Faber (0:31)

Plus, we're gonna give you a retail roundup that's by seeing sluggish electronics demand, Kohl's with a massive miss, and Foot Locker saying its turnaround strategy is showing signs of life.

And as well, of course, that takes us to the consumer. Cruise Line's the latest to turn to discounting, while McDonald's pushes back against reports of runaway prices.

Carl Quintanilla (0:52)

Let's begin with the markets set for a lower open here and Salesforce tumbling pre-market. Q1 Revenue and the current quarter guide does come in below street forecasts, overshadowing an Irving's beat. Jim and Marc Benioff did discuss the market reaction last night on Mad Money.

Jim Cramer (1:08)

You can't control the stock, but the environment is not so bad. You're not giving me the, look, the environment's gotten weaker, it's gotten tougher in Europe, it's gotten tougher in Asia. I'm not hearing that from you.

Marc Benioff (1:20)

Jim, you can't control the buying environment. The reality is you're gonna have heterogeneous buying environments. It's gonna happen. And we're in this post-pandemic reality where the buying environment has been, we've talked about this now for a few quarters, been very measured for enterprise software companies, not just the company like Salesforce, but many companies.

So what are we gonna focus on? We're gonna focus on improving our cashflow and our margins.

Carl Quintanilla (1:44)

Jim, we've talked about softness and software all week, but this decline is relatively historic for CRM.

Jim Cramer (1:50)

Yes, okay, so it's single digit growth.

Mark was a little more bullish than his CFO on the call. So I want to just give you some of the points that on the call, they talked about sales moderating after a strong fourth quarter. They talked about a constrained sales cycle. Mark did not give me that. They talked about elongated budget scrutiny. Mark did not give me that. They talked about licensed revenue volatility. He did not give me that. And they talked about measured buying environment. He did not give me that. And so what he did say was overall things have been tougher.

And I think that to get as granular as what the CFO would not be appropriate necessarily in the interview, but I did want people to understand that's why the selling, because otherwise, what he's saying is, hey, kind of we've seen this for two years. They've not seen that level, which I think is related to chat.

David Faber (2:44)

To chat.

Well, let's make the point more clear here, because what the question I'm hearing is, all right, if there are longer deal cycles, are companies starting to repurpose some of their spending away from these companies to AI, to whatever they may need? I don't know. You say chat. I'm not sure what that means.

Jim Cramer (3:06)

No, no, you're absolutely right. Let's get more granular.

There is a repurpose. There is a fear that maybe we don't need as many people. A law firm, instead of hiring 100, might be hiring 80 There's a belief that maybe one to three percent of the people that you might be bringing on are not needed, so let's hold back and let's not buy a really big software package because we may not have as many people next year when we hire.

David Faber (3:27)

That's an interesting point because what I've also heard is some people saying, well, do I need, you know, I'm repurposing my business to a certain extent to using AI. At some point, I may be buying $6,000 PCs that are completely AI enabled, bring it to the edge for my employees.

Do I really need Slack? You know, can I get by with Microsoft Teams?

Jim Cramer (3:49)

I mean, Cash Rangan, who actually wrote a very positive piece of gold, he did say, look, and it was crystallized everything, quote, if maybe there's a structural change that is going on. So in other words, we think it's cyclical. The fourth quarter is very strong for Salesforce. Then things dropped off. So the question is, did they drop off because the environment, and you just say Latin America, Europe and United States weaker, which leaves you like only Asia where you're from from as last week.