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It’s not been easy being a Salesforce investor lately, but the Club is not ready to walk away from the stock — even after an analyst downgrade added pressure to shares in Monday’s ugly tape. The news Analysts at D.A. Davidson downgraded Salesforce to an underperform sell rating from neutral and cut its price target to $200 a share from $250. In a note to clients, analysts said they believe the enterprise software provider is neglecting its core business to place a “premature” bet on artificial intelligence with its new Agentforce offering; Data Cloud is the company’s other AI product. The firm expects growth in Salesforce’s other applications to further decelerate, leading to weak performance for the stock. Salesforce’s focus on Agentforce makes strategic sense, given the importance of AI for the long term, analysts acknowledged. Plus, they noted that Salesforce’s annual recurring revenue for “Data Cloud and AI” was a combined $900 million at the end of its fiscal year in January. However, D.A. Davidson said that “betting the whole company” on Agentforce will come at a cost to the rest of the business, particularly past acquisitions such as Slack and MuleSoft. Simply put, it is “too early” to be going all in on AI, analysts argued. Shares of Salesforce dropped 4.5% on Monday, ending the session at $236.26 apiece. The tech-heavy Nasdaq lost 2.55%, closing off its lows of the day. CRM 1Y mountain Salesforce’s stock performance over the past 12 months. Big picture At the start of the year, some on Wall Street — and us at the Club — were bullish on Salesforce due to the potential of Agentforce. The product, which became generally available in late October, is a suite of tools that allows companies to build “AI agents” that can execute various tasks without human intervention. An updated version of the product, dubbed Agentforce 2.0, rolled out in February. However, the positivity that once surrounded Salesforce’s AI initiatives has not been enough to keep the stock afloat in a difficult year for the market — and especially the broader AI trade — as concerns about a tariff-fueled recession have mounted. Salesforce shares are down about 17% over the past month and roughly 30% year to date. Turnover on Salesforce’s executive team also has been cited as a factor for some of the stock’s weakness earlier this year. Its mixed earnings report in late February also left some investors disappointed. Salesforce has not been able to find its footing in recent weeks despite some on Wall Street maintaining a more positive view on the stock. In an April 9 note to clients, analysts at Evercore said Salesforce — and fellow Club name Microsoft , for that matter — were both relatively well positioned to weather the macroeconomic uncertainties sparked by President Donald Trump’s tariffs. At the time, the analysts liked that the stocks had already seen their valuations come down and believed the companies could adjust their spending levels to protect their earnings. While software companies generally don’t have a lot of direct tariff exposure, the concern for the group is that belt-tightening from their customers could dampen spending on software and lead to deals taking longer to complete. Bottom line Jim Cramer disagrees with D.A. Davidson analysts’ outlook. On Monday’s Morning Meeting, Jim said he believes Salesforce CEO Marc Benioff is throwing the company’s weight behind Agentforce because the rest of the business is doing quite well. Jim said Benioff’s eventual goal is for companies to more broadly deploy Agentforce across their organizations — not just use as a tool to help their salespeople. “There’s a big view that Marc does not want to stop at sales,” Jim said. When we added to our Salesforce position in early March , we cited our belief that Agentforce will be lucrative down the road. Jim reiterated that view again Monday, even as the market landscape as changed a lot since then. “I’m not backing away from it because … I take a longer-term view on this. The bigger view is going to work,” Jim said, while acknowledging that owning the stock this year has been painful and some investors may not want to see it through. “There’s been many situations when the pain has been very great, and we’ve managed over the years to make a lot of money,” Jim said. (Jim Cramer’s Charitable Trust is long CRM, MSFT . See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. 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Salesforce signage is seen at its headquarters in San Francisco on Feb. 28, 2024.
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It’s not been easy being a Salesforce investor lately, but the Club is not ready to walk away from the stock — even after an analyst downgrade added pressure to shares in Monday’s ugly tape.
