Shares of Salesforce Inc (NYSE: CRM) dipped on Monday after Morgan Stanley downgraded the stock. Here's what investors need to know.
The CRM Analyst: Keith Weiss downgraded shares of Salesforce from Overweight to Equal Weight, and set a $278 price target on the stock.
The CRM Takeaways: The Morgan Stanley analyst noted the downgrade is largely due to the exhaustion of near-term catalysts, including margin expansion and price increases. Though optimistic about Salesforce's long-term potential to penetrate larger enterprises with vertically oriented solutions, the realization of benefits from Generative AI in the near term are non-existent.
Weiss said the prospects for Salesforce shares climbing higher are increasingly reliant on the company exceeding growth expectations.
To beat growth expectations, Weiss said Salesforce needs both an improvement in core demand reflected in its subscription model, and investors' patience for evident benefits from GenAI on the top-line.
The analyst said uncertainties surrounding Generative AI and its impact on growth, along with limited access to Unlimited tiers in Sales and Service Clouds, make it challenging to fully credit the company with near-term benefits.
What's crucial to note is that Morgan Stanley's downgrade does not negate Salesforce's potential. The $278 price target, up from $251, points to bullish metrics ahead.
However, Weiss said the road to unlocking the value may be a longer journey than previously anticipated.
CRM Price action: Shares of Salesforce are trading 1.17% lower to $222.97, according to data from Benzinga Pro.