Salesforce Inc.’s stock has been soaring as investors show great interest in the field of artificial intelligence. However, some experts believe that this optimism might be a bit excessive, especially in the short-term.
Keith Weiss from Morgan Stanley recently downgraded the software stock from overweight to equal weight. While Weiss acknowledges the long-term potential opportunities for Salesforce, he remains skeptical about the timeline for the company to fully benefit from generative AI.
Weiss points out a few reasons for his cautious stance. Limited accessibility to Unlimited tiers in Sales and Service Clouds, alongside uncertainties surrounding access, capabilities, and pricing of consumption credits, are among the factors impacting his near-term outlook on the company. Despite this downgrade, Weiss did increase his price target for the stock from $251 to $278.
It’s worth noting that Salesforce’s AI initiatives aren’t the sole driving force behind the company’s impressive 70% stock gain this year. Wall Street has also responded positively to Salesforce’s commitment to maximizing profits.
Read also: Salesforce Announces Rare Price Increases, Boosting Stock Performance
Salesforce’s Stock Faces Challenges as AI and Subscription Model Lag
Microsoft and Google have been leading the charge when it comes to AI innovation, but Salesforce is struggling to keep up. According to Weiss, an industry expert, the “near-term catalysts” for Salesforce’s stock are now behind us. He believes that it will take time for Salesforce to fully leverage the potential of generative AI and reflect improved core demand within its subscription model.
On the other hand, Weiss is more optimistic about the future of Adobe Inc. In fact, he has upgraded his rating on Adobe shares from equal-weight to overweight and raised his price target to $660 from $510. Weiss highlights Adobe’s GenAI products, particularly Firefly, and the enhancements made to its flagship applications as reasons for this positive outlook.
Weiss is not alone in his bullish sentiment towards Adobe. BMO Capital Markets analyst Keith Bachman also turned optimistic on Adobe shares earlier this year.
This optimism seems justified as Adobe’s shares have been performing exceptionally well. In Monday’s trading, they were up by 3%, bringing their year-to-date gains to an impressive 62%. In contrast, Salesforce’s stock was down by 0.3% on the same day.
While Salesforce faces challenges in harnessing the power of AI and improving its subscription model, Adobe seems to be steering ahead with its innovative offerings and strong market position. It remains to be seen how Salesforce will catch up and regain its momentum in the ever-growing AI landscape.
