BofA Has Changed Its Mind About Salesforce: Why the Bank Now Recommends Buying Its Stock

Bank of America has sharply revised its recommendation on shares of Salesforce, a developer of cloud-based customer relationship management systems. The bank’s analysts have abandoned their bearish stance on the company’s stock and assigned it a “bullish” rating, according to CNBC. BofA believes that artificial intelligence will not undermine the company’s position but, on the contrary, will deepen reliance on Salesforce software.

BofA upgraded its rating on Salesforce shares from a “sell” to a “buy” recommendation, skipping the “neutral” rating in between. At the same time, the bank raised its price target for the company’s stock from $160 to $285, implying a 22% upside potential relative to the closing price on October 12.

Analysts acknowledged that they “have revised their outlook on the expected pace of artificial intelligence adoption and its potential impact on enterprise software developers,” according to Barron’s. Established platforms such as Salesforce are more resilient “than previously thought,” BofA wrote.

“Large enterprises, unlike small and medium-sized businesses, are unlikely to replace the platforms on which their business logic, data, workflows, and compliance systems are stored,” CNBC quotes Tala Liani, an analyst at the bank, as saying. He believes that artificial intelligence will only reinforce dependence on these platforms.

BofA strategists predict that Salesforce’s AI strategy will enable it to attract even more customers to its platform. Among other drivers, they cited robust free cash flow generation and accelerated revenue growth.

While Salesforce’s revenue from artificial intelligence remains modest, and slower-than-expected adoption is the main short-term risk for the stock, Liani notes. However, the bank sees encouraging signs of growing momentum, including a steady increase in the net value of new annual contracts and accelerating growth in metrics for Slack, Salesforce’s employee communication tool. In late September, Meta decided to expand the capabilities of its successful new AI agent, Muse, into the enterprise segment; to do so, it “integrated” it with Slack, among other platforms.

Salesforce shares rose 2.1% during trading on October 12. Year-to-date, they are down more than 11 percent: investor concerns that the widespread adoption of artificial intelligence could undermine demand for software in general have largely weighed on the stock, according to CNBC.

42 out of 60 analysts covering Salesforce stock recommend buying it. 17 advise holding the stock in their portfolios, and only one recommends selling.

Salesforce’s double rating upgrade marked a significant shift in sentiment toward the company’s stock, Barron’s notes. Market participants’ concerns about software developers have intensified since February and have even been dubbed the “SaaSpocalypse”— the software apocalypse. Investors feared that AI agents would begin to duplicate the functionality of expensive enterprise software, causing software companies’ clients to cancel their subscriptions and cut staff. Nevertheless, the August rally in this sector may indicate that these risks have been overestimated, as MarketWatch previously reported.

In mid-September, Salesforce held its three-day Dreamforce conference, where it reaffirmed its long-term growth goals and made it clear that it is successfully weathering the AI boom. In addition, the company secured the support of OpenAI CEO Sam Altman and Anthropic CEO Dario Amodei, who spoke at the event, according to Barron’s.

This article was AI-translated and verified by a human editor