Guggenheim upgrades Salesforce, removes price target after recent decline

Investing.com -- Guggenheim upgraded Salesforce (NYSE:CRM) to Neutral from Sell after the recent 26% pullback in the stock since January, which brings the share price closer to the brokerage’s prior price target of $247.  

The firm has now removed its price objective, noting that the current valuation is now “more aligned with the company’s future prospects.”

Guggenheim downgraded Salesforce shares in January, citing concerns around the company’s ability to monetize its generative AI platform, Agentforce, and that fiscal year 2026 (FY26) guidance would fall short of consensus.

“We believe investors gave the company too much credit – too quickly – to lead the charge in monetizing Agentic AI,” analyst John DiFucci wrote, pointing to the stock’s 42% rally after Agentforce’s introduction, outperforming the broader software sector.

Salesforce has since guided FY26 revenue below expectations and announced major leadership changes, including the departure of its COO.

While these developments have added to market uncertainty, DiFucci notes that forex (FX) tailwinds now help offset some risks tied to revenue projections. 

“A 120bps positive swing in FX translation effects since guidance was given results in positive optics for reported revenue,” the analyst said.

Despite the upgrade, analysts remain cautious about Agentforce’s potential, warning that adoption may be hampered by macroeconomic headwinds and limited differentiation in the crowded AI space. 

DiFucci highlights Salesforce’s weak innovation track record and argues that AI will become ubiquitous across SaaS applications, making it difficult to monetize meaningfully. 

“Frankly, we do not expect material monetization of Agentforce in FY26 (or perhaps ever),” DiFucci continued.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads.

The analyst also questioned the long-term attractiveness of Salesforce’s valuation. The stock currently trades at roughly 6x enterprise value to next-twelve-month (NTM) recurring revenue, and around 17x EV/NTM free cash flow.

While some investors consider this attractive, Guggenheim analysts said they are “not so sure that’s the case for a company approaching mid-single digit revenue growth.”

CRM: is this perennial leader facing new challenges?

With valuations skyrocketing in 2024, many investors are uneasy putting more money into stocks. Sure, there are always opportunities in the stock market – but finding them feels more difficult now than a year ago. Unsure where to invest next? One of the best ways to discover new high-potential opportunities is to look at the top performing portfolios this year. ProPicks AI offers 6 model portfolios from Investing.com which identify the best stocks for investors to buy right now. For example, ProPicks AI found 9 overlooked stocks that jumped over 25% this year alone. The new stocks that made the monthly cut could yield enormous returns in the coming years. Is CRM one of them?

Unlock ProPicks AI to find out