Salesforce’ (CRM) upcoming fiscal Q1 results are unlikely to spur excitement as it is usually a seasonally soft quarter, and with foreign exchange headwinds and weak prints from front-office peers tempering expectations, Morgan Stanley said in a report Friday.
But the firm said the near-term caution is being offset by its “increasingly bullish” medium-term outlook for Salesforce amid increasing demand for generative AI capabilities.
Morgan Stanley said it expects the currency headwind to modestly increase throughout the rest of the fiscal year, and does not anticipate any near-term topline boost from the company’s generative AI adoption at this stage.
“Q1s historically do not support much upward revisions to full year guidance,” it said.
However, the firm said Salesforce looks “well positioned to expose GenAI capabilities within their sticky workflow to the large customer base.”
“Salesforce’s position as a front office application vendor should position the company in the right place for GenAI, where we will look to Data Cloud as the leading indicator for demand,” it said.
The firm thus sees the stock’s current valuation as “undemanding and providing an interesting entry point for exposure
to a durable grower with GenAI adoption tailwinds with greater margin capacity.”
Morgan Stanley reiterated its overweight rating on the stock with a $350 price target.