John DiFucci, an analyst from Guggenheim just downgraded Salesforce (CRM, Financial) on challenges in monetizing artificial intelligence and a lack of innovation.
The CRM specialist was downgraded to “Sell rating from “Neutral” rating and lower the price target to $247 or 26% below the closing price prior their rating announcement.
Salesforce is one of market leaders in CRM (Customer Relation Management) Industry, they even set CRM as their stock code for strong association to the business. Salesforce accounts more than 22% market share as of 2023 but competition is tough as Microsoft, SAP and Oracle also hold significant shares. And DiFucci concerned that Salesforce has no room to grow.
The sales growth has indeed slowed compared to pre-pandemic levels with only 8.3% growth in the third quarter. The guidance for the fourth quarter is between 7% to 9% sales growth with Agentforce, the Salesforce's agentic AI, as the growth hope.
Agentforce was launched in September and already signed up 200 companies to deploy Agentforce as their smarter chatbot. Marc Benioff, the CEO of Salesforce, explained on Salesforce's recent earnings that Agentforce expanded the company's total addressable market, and that's where they can grow.
Implicitly Salesforce presented their potential addressable market on their general online spending report today. Salesforce explained that the online spending in the U.S. from November to December hit a record of $282 billion or 4% higher than in the same period in 2023 with higher social media sales from TikTok, Instagram and with aid from AI agents.
The report implicitly told retailers that deploying agentic AI will be very much useful for their business during peak shopping season and it will be interesting to see how the retailers respond to the report.
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