Bear to bull: A double upgrade of Salesforce illustrates the folly of the ‘SaaSpocalypse’
They’ve seen enough. Bearish analysts at Bank of America did an about-face on Salesforce — jumping over to the believers camp, where Jim Cramer has been all along in the face of artificial intelligence threats. The firm double upgraded Salesforce to buy from sell, sending shares of the software stock up roughly 1.5% in Monday’s session. Analysts acknowledged they previously overstated the AI disruption risks for an established company like Salesforce, whose applications have helped marketers, customer service agents, and salespeople do their jobs for many years. Instead, BofA analysts said they’ve grown to believe the enterprise software giant has a credible AI strategy and can use the technology to drive more spending on its platform. Their new price target is $285 a share, up from $160. “Salesforce was not falling apart, and it was the wrong call,” Jim said on Monday’s Morning Meeting . Bank of America’s newfound optimism is another signal that the “SaaSpocalypse” is over , at least for Salesforce. For a large part of the year, Salesforce’s stock was crushed by fears that AI would upend the seat-based business model embraced by most software-as-a-service companies. There were also concerns that AI would empower clients to build in-house applications that would replace Salesforce tools. But, in late August, Salesforce reported a great quarter and it has also struck partnerships with the likes of Anthropic to ensure it keeps a seat at the AI table. Shares are up more than 50% from their 52-week closing low of roughly $150 in late June. The August earnings report turbocharged the stock’s emerging rebound. To be sure, shares have lost some momentum since closing at roughly $264 on Sept. 3 and remain down about 12% year to date. CRM YTD mountain Salesforce’s year-to-date stock performance. Throughout the turbulence this year, Jim maintained that Salesforce’s business was far more resilient than Wall Street was assuming. That is why we didn’t bail on the stock, as frustrating as it was to endure such a steep drawdown. The crux of his argument was that Salesforce’s software is deeply embedded in its customers’ operations, making it difficult to replace with applications built using AI. Salesforce is “a very complex system” and not “something that’s vibe coded,” Jim said Monday. Bank of America has come around to that view, thanks in part to conversations with chief information officers (CIOs) — the people in charge of companies’ IT systems and strategy. “Conversations with CIOs and other market participants suggest that large enterprises (more than SMBs) are unlikely to replace platforms that house their business logic, data, workflows and compliance frameworks,” analysts wrote, using a shorthand for small- and medium-sized businesses. “If anything, AI should deepen dependence on these platforms.” Bank of America also argued that Salesforce has the right approach to staying relevant — and making money — as AI usage grows across companies. “We believe Salesforce offers one of the most comprehensive approaches to enterprise AI adoption,” analysts wrote. A big part of this strategy is recognizing that employees shouldn’t have to log into a Salesforce application in order to access the valuable data stored inside it. With white-collar workers spending more of their time in chatbots like Anthropic’s Claude, Salesforce has decided to swim with that current, rather than fight against it. Salesforce’s decision to lean into this new world was on display in late August, when the company unveiled its “Claudeforce” partnership with Anthropic. That announcement coincided with Salesforce reporting better-than-expected fiscal 2027 second-quarter results and issuing guidance for its current quarter that supported its commitment to reaccelerate growth into the end of the year. The one-two punch of good news demonstrated that the “Saaspocalypse” narrative was losing steam, and we raised our price target on the stock to $250. This was followed by a successful Dreamforce in September . At Salesforce’s annual conference, the company offered more detail on its strategy to embrace a world where the traditional application interface means less than before. While this raises about how Salesforce will monetize its rich data libraries over the long term, we liked what we heard. Monday’s double-upgrade shows that Bank of America did too. The company still has work to do to completely win Wall Street over, with nearly one-third of analysts maintaining hold-equivalent ratings on the stock. For now, though, we’re happy to see at least one skeptic throw in the towel. (Jim Cramer’s Charitable Trust is long CRM. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . 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