Morgan Stanley analyst Keith Weiss has downgraded Salesforce stock to Equal Weight from Overweight, causing the cloud-based software giant’s shares to edge lower. Despite the downgrade, Weiss has raised his target price for Salesforce stock to $278 from $251. This shift reflects a focus on 2025 results rather than 2024 and incorporates higher estimates resulting from recent product price increases.
Currently, Salesforce shares are down 1.2% at $222.81 on Monday.
Few Near-Term Catalysts for Salesforce
Weiss believes that there are few near-term catalysts that could drive Salesforce shares higher. He acknowledges that the stock has performed strongly in recent months, with a year-to-date increase of approximately 68%. This surge has been fueled by factors such as margin expansion, pressure from activist investors, price increases, and announcements regarding generative AI software plans.
However, Weiss notes that now that these catalysts have played out, the company must focus on exceeding growth expectations to maintain upward momentum. He emphasizes that although improving core demand will eventually translate into favorable results due to the subscription model, it will take time for these benefits to materialize. Therefore, investors will need to exercise patience to witness noticeable revenue growth from Salesforce’s push into generative AI.
Undemanding Earnings Multiple
Weiss highlights that Salesforce’s earnings multiple is considered “undemanding” at 20 times his calendar 2025 forecast. This figure is lower than the 26 times multiple typically seen for an average large-cap software company. Nevertheless, Weiss points out that additional catalysts to support a re-rating of the multiple will take time to develop and be realized.
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