Salesforce Downgrades Test the Case for an AI Pivot

Salesforce (NYSE:CRM) faced renewed pressure after Morgan Stanley and KeyBanc downgraded the stock, questioning whether its heavy investments in artificial intelligence and the Agentforce platform can meaningfully boost organic growth while legacy businesses continue to underperform.

Rating Changes

Morgan Stanley downgraded the stock from "Overweight" to "Equal Weight," while KeyBanc lowered it from "Overweight" to "Sector Weight." Both firms also cut their price targets.

Analyst Rationale

Analysts argue that Salesforce's AI investments, particularly Agentforce, have yet to translate into sufficient organic growth to offset the slowdown in its traditional businesses. Additionally, high costs from these investments are pressuring margins.

Context

The downgrades come as the stock was already under pressure, with shares down 31.48% year-to-date and a one-year total shareholder return decline of 33.18%. Salesforce still trades at a P/E multiple of around 25x, which some analysts see as justified if the AI pivot succeeds.

What to Make of It

The downgrades suggest the market needs stronger evidence that AI investments will pay off. Investors should watch upcoming quarterly reports to gauge Agentforce's impact on revenue.