Salesforce slips as Morgan Stanley downgrades on lack of near-term catalysts

Stephen Lam

Salesforce (NYSE:CRM) shares slipped 1.5% in pre-market trading after Morgan Stanley downgraded the cloud computing giant on concerns that the next catalyst will take longer than expected.

Analyst Keith Weiss lowered his rating on Salesforce (CRM) shares to equal-weight from overweight, but boosted his price target to $278 from $251, noting the stock has benefited from margin expansion, the presence of activist investors, price increases and generative AI announcements. With those already announced, the stock moving higher “becomes increasingly centered on showing upside to growth expectations,” which Weiss said will take time.

“With regard to Generative AI announcements, limited access to Unlimited tiers in Sales and Service Clouds, as well as, uncertainty on access, capabilities and pricing of consumption credits (which are expected to be the more significant driver on GenAI-related growth vs. seat-based uplifts), keeps us from crediting the company more fully with near-term benefits,” Weiss wrote in an investor note.

Weiss also pointed out that the “limited” seat access and uncertainty on pricing of consumption credits lead him to believe that any financial benefits that Salesforce (CRM) will see are “unlikely” to be a near or medium-term catalyst.

Earlier this month, Salesforce (CRM) unveiled pricing for its generative artificial intelligence tools, Sales GPT and Service GPT. Both services cost $50 per user per month and come with a “limited” number of credits for its generative AI tool, Einstein GPT.

Separately, the company also raised list prices an average of 9% across Sales Cloud, Service Cloud, Marketing Cloud, Industries and Tableau, starting next month.

Analysts are extremely bullish on Salesforce (CRM). It has a BUY rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha’s quant system, which consistently beats the market, rates CRM a STRONG BUY.