BMO cuts Salesforce stock price target to $375, retains Outperform

On Friday, BMO Capital Markets adjusted its outlook on Salesforce.com (NYSE:CRM) stock, reducing the price target to $375 from the previous $425, while maintaining an Outperform rating. The adjustment comes amid expectations of initial guidance from companies that may not meet investor hopes, as noted by BMO Capital in a recent year-ahead note. According to InvestingPro data, Salesforce currently trades at $318.43, with analyst targets ranging from $247 to $442, suggesting the stock remains undervalued based on InvestingPro’s Fair Value analysis.

Keith Bachman of BMO Capital expressed a cautious stance regarding the near-term impact of Salesforce’s new product, Agentforce, on the company’s financial guidance for FY26. Despite the anticipation that Salesforce’s management might provide conservative revenue guidance initially, BMO Capital’s long-term view on the company remains positive. This optimism is supported by Salesforce’s impressive financial health metrics, including a perfect Piotroski Score of 9 and robust gross profit margins of 77%.

The lowered price target reflects concerns over the forthcoming guidance. However, BMO Capital’s analysts believe that the consumption-based nature of Agentforce’s revenues could lead to underwhelming initial projections. The firm has also removed Salesforce from its list of top picks, now singularly recommending SAP with an Outperform rating and a price of $287.92. InvestingPro analysis reveals that Salesforce maintains strong fundamentals with $11.9 billion in levered free cash flow and a healthy 9.5% revenue growth rate.Want deeper insights? InvestingPro offers 12 additional exclusive tips and comprehensive analysis for Salesforce, available in the Pro Research Report.

Salesforce shares responded to the revised financial outlook, with the market absorbing the implications of BMO Capital’s analysis and the potential for subdued guidance. The company’s stock performance and investor sentiment will likely be influenced by the actual guidance provided by Salesforce’s management in the coming period.

Salesforce, a leader in customer relationship management software, continues to innovate with products like Agentforce, aiming to adapt to the evolving needs of businesses. The market will closely watch how these developments translate into financial performance and whether BMO Capital’s predictions align with Salesforce’s strategic outcomes.

In other recent news, Salesforce is in negotiations for a substantial cloud agreement with Microsoft (NASDAQ:MSFT), Google (NASDAQ:GOOGL), and Oracle (NYSE:ORCL), potentially valued at over $1 billion. This move aims to expand Salesforce’s use of public cloud providers, complementing its existing reliance on Amazon (NASDAQ:AMZN) Web Services and Google Cloud. Salesforce Ventures also participated in a $305 million funding round for Together AI, a startup focused on AI computing, which has now reached a valuation of $3.3 billion. Stifel analysts maintained a Buy rating for Salesforce with a $425 price target, highlighting the potential of its Agentforce product to drive future revenue growth. Evercore ISI echoed this positive outlook, maintaining an Outperform rating and a $420 price target, noting the "halo effect" of Agentforce on Salesforce’s business activities. BofA Securities also reiterated a Buy rating with a $440 price target, citing Salesforce’s potential for growth acceleration and margin expansion. These developments reflect Salesforce’s strategic initiatives and the analyst community’s confidence in its future performance.

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