Salesforce’s Stock Faces Uncertainty as Morgan Stanley Downgrades AI Expectations
Salesforce Inc.’s stock has been riding high on the wave of interest surrounding artificial intelligence (AI). However, Wall Street’s enthusiasm may be getting ahead of itself in terms of the company’s ability to capitalize on this hot trend, at least in the short term. Morgan Stanley’s Keith Weiss downgraded the software stock from overweight to equal weight, citing caution regarding Salesforce’s timeline for reaping the benefits of generative AI.
Weiss explained that limited access to unlimited tiers in Sales and Service Clouds, as well as uncertainty surrounding access, capabilities, and pricing of consumption credits, is preventing them from fully crediting the company with near-term benefits. Despite the downgrade, Weiss did increase his price target on the stock to $278 from $251. Salesforce shares have already gained an impressive 70% this year, and the success is not solely attributed to AI. The company’s renewed focus on profitability has also resonated well with investors.
Weiss believes that Salesforce’s near-term catalysts are now behind them. He expresses concern about the amount of time it will take for Salesforce to reflect improved core demand within its subscription model and for clear revenue tailwinds related to generative AI to emerge. However, it is worth noting that Weiss’s sentiment has not dampened his outlook on Adobe Inc. In fact, he has upgraded his rating on Adobe shares.
This news marks a shift in Salesforce’s trajectory, as the company has been at the forefront of AI discussions. Recent announcements related to generative AI have grabbed attention, but Morgan Stanley’s downgrade suggests that substantial benefits may be further down the line. The rating change highlights the challenges faced by Salesforce in translating the promises of AI into tangible gains.
Investors and industry analysts will be closely watching Salesforce’s progress in both recognizing and capitalizing on the potential of AI. With the downgrade from Morgan Stanley, attention will turn to how the company responds to the current obstacles and navigates the timeline for benefiting from generative AI. Salesforce now faces a period of scrutiny as it strives to prove that it can deliver on the AI expectations that initially attracted so much attention.
Ultimately, the story of Salesforce and its stock is still unfolding. The road to realizing the promises of AI may be longer and more complex than initially anticipated. However, the long-term opportunities for Salesforce remain attractive, and the company’s ability to adapt and leverage emerging technologies will play a significant role in its future success. As the AI landscape continues to evolve, Salesforce will need to show that it can effectively meet the demands and expectations of both investors and customers.
