A Neutral Shift: Guggenheim Upgrades Salesforce Amid Valuation Concerns and AI Uncertainties

The investment community is once again grappling with the paradox of Salesforce (NYSE:CRM), a company whose stock has oscillated between hope and skepticism for years. Guggenheim’s recent decision to upgrade Salesforce to Neutral from Sell, while simultaneously removing its price target, underscores the dual narrative playing out in the software giant’s valuation: a near-term reprieve against a backdrop of lingering doubts about its ability to capitalize on artificial intelligence (AI) and sustain growth in a volatile economy.

The upgrade, announced in early 2025, followed a steep 26% decline in Salesforce’s stock since January—a drop that brought its share price closer to Guggenheim’s prior $247 price target. Analyst John DiFucci noted that the correction had “normalized” the stock’s valuation, now trading at 6x NTM revenue and 17x NTM free cash flow, levels he argues reflect Salesforce’s muted growth trajectory. Yet the removal of the price target signaled a broader acknowledgment that Salesforce’s path forward remains fraught with uncertainty.

At the heart of the debate is Salesforce’s AI platform, Agentforce. Launched with fanfare, the tool initially drove a 42% stock surge, outpacing the broader software sector. But enthusiasm faded as Salesforce’s fiscal 2026 (FY26) revenue guidance fell short of expectations, and leadership changes—including the departure of its Chief Operating Officer—fueled investor anxiety. DiFucci was blunt: “We do not expect material monetization of Agentforce in FY26 (or perhaps ever).”

The skepticism stems from two core issues. First, Salesforce’s track record of innovation has been inconsistent. While its early dominance in CRM software was transformative, subsequent products like Einstein AI and Tableau have struggled to deliver outsized returns. Second, the AI landscape is now crowded, with rivals like Microsoft, Oracle, and even startups offering competing tools. Guggenheim argues that AI is becoming a “commodity,” with differentiation increasingly hard to achieve.

Compounding these challenges is Salesforce’s valuation. At 6x NTM revenue, it sits below peers like Adobe (7.2x) and ServiceNow (8.5x), but its free cash flow multiple—17x—is elevated, reflecting investor faith in its long-term model. However, with revenue growth projected to remain in the mid-single digits, even forex tailwinds—a 120 basis-point boost from currency swings—can only offset so much.

Meanwhile, the broader market is split. DA Davidson cut its price target to $250, citing fears of a U.S. GDP contraction, while Truist maintained a Buy rating with a $400 target, citing Salesforce Industries’ 20% annual recurring revenue (ARR) growth. Institutional ownership also shifted: Vanguard increased its stake, while others trimmed positions, reflecting the stock’s polarizing appeal.

Salesforce’s recent dividend hike—4% to $0.42 per share—adds a defensive layer, but it’s insufficient to offset structural concerns. The company’s valuation dilemma is clear: investors are pricing in a slowdown but still demanding proof of innovation.

In conclusion, Guggenheim’s Neutral rating captures Salesforce’s paradoxical reality. The stock’s correction has eased near-term valuation pressures, but long-term growth hinges on two variables: whether Agentforce can achieve meaningful monetization in a crowded AI market and how Salesforce navigates macroeconomic headwinds. With 6x NTM revenue and 17x EV/NTM free cash flow, the stock is neither a screaming buy nor a sell—hence the Neutral stance. Yet history suggests Salesforce must innovate faster than its valuation allows. For now, investors are left waiting for answers, with the company’s next earnings report likely to reignite this debate.