Salesforce Sentiment Sours: Why DA Davidson Sees More Price Pressure Ahead

Salesforce, Inc. (CRM), a global leader in cloud-based customer relationship management (CRM) software, has long stood at the forefront of the software-as-a-service (SaaS) movement. Its subscription model, relentless acquisition strategy, and expansion into artificial intelligence (AI)-driven automation have made it a bellwether in the technology sector. However, today's market narrative shifts as DA Davidson issues a notable downgrade—moving Salesforce from "Neutral" to "Underperform" with a $200 price target—implying a significant downside from current levels. For sophisticated investors, analyst downgrades—particularly from established firms—can signal a pivotal inflection point, warranting a closer examination of both risk and opportunity.

Key Takeaways:

• Potential Downside Risk: DA Davidson's new $200 target represents a 16% decline from Salesforce's current trading price of $238.27.

• Price Weakness Intensifies: CRM shares are down 3.6% in today's trade, continuing a broader downward trend that has erased nearly 36% from December 2024 highs.

• Sector Headwinds and Utilization Concerns: Recent studies highlight that 75% of businesses underutilize CRM systems, raising questions about market saturation and efficiency gains.

• AI Adoption Offers Long-Term Tailwinds: Despite short-term headwinds, AI-driven automation is compressing sales cycles and could power future growth, though near-term volatility remains elevated.

• Analyst Firm Influence: DA Davidson, known for its rigorous mid-market technology coverage, brings added weight to this downgrade amid tepid sentiment and technical weakness.

Unpacking the Downgrade: Analyst Rationale and Implications

DA Davidson’s Perspective and Market Influence

DA Davidson's technology equity analysts are recognized for their granular, fundamental research—particularly among mid-cap and growth-stage software companies. Shifting CRM to "Underperform" signals a rising conviction that Salesforce could underperform both the sector and broader indices over the next 12 months. The price target cut to $200 underscores a lack of near-term catalysts and growing concerns regarding competitive pressures and market over-optimism.

DA Davidson’s track record in the SaaS and enterprise software space suggests their move is not made lightly. Their downgrade aligns with mounting concerns over saturation in the core CRM market and the pace at which Salesforce can translate AI investments into sustainable revenue growth. The firm’s research often resonates with institutional allocators and can prompt near-term price action as funds recalibrate positions.

"In complex software cycles, DA Davidson’s downgrades often foreshadow further institutional derisking—especially when price momentum is already negative." – DeepStreet.io Analyst Insight

Salesforce Business Model and Sector Backdrop

Salesforce’s revenue engine is built on recurring cloud subscription fees from its expansive suite of sales, service, marketing, and analytics tools. The company’s acquisition-fueled diversification (e.g., Slack, Tableau) and recent AI initiatives have kept it relevant as enterprise digital transformation accelerates. Yet, the latest research from BluePaperclip reveals that 75% of businesses are not fully leveraging CRM platforms, suggesting that future growth may depend less on new customer wins and more on deepening existing relationships and driving adoption.

Recent news highlights:

• AI-Powered Automation Impact: A Newsfile Corp. study found AI-driven CRM automation is helping businesses close deals 31% faster, validating Salesforce’s push into intelligent sales tools.

• CRM System Underutilization: The same research, however, flags chronic underutilization, which could cap near-term expansion and exacerbate competitive pricing pressures.

Quantifying the Downside: Price Targets and Market Action

• Current Price: $238.27

• DA Davidson Target: $200

• Implied Downside: ~16%

Today’s 3.6% stock slide, on relatively thin volume compared to historic highs, compounds a broader technical breakdown. Salesforce peaked at $369 in December 2024 and has since retraced sharply, with the 20-day EMA and SMA trending well below $260, and a Relative Strength Index (RSI) of 32.5 reflecting ongoing oversold conditions. The company’s one-year sentiment ratio (up days to down days) stands at a middling 0.5, highlighting persistent indecision among traders and portfolio managers.

Technical and Fundamental Signals: What’s Driving Weakness?

Price Trend and Momentum Analysis

• One-Year Range: $212 (May 2024 low) to $369 (Dec 2024 high)

• Current Technicals: VWAP at $282.24, 20-day EMA at $259.33

• Momentum: Daily price change averages negative, with RSI nearing oversold territory.

The technical profile is bearish: CRM trades below both short- and medium-term moving averages, with the upper Bollinger Band at $291 and lower at $230. This positions the stock in a downward channel, susceptible to further selloffs if institutional sentiment deteriorates.

Company Financials and Growth Outlook

While Salesforce has demonstrated robust top-line momentum through fiscal 2025, recent quarters have seen margin compression and slowing net new customer growth. Investors are scrutinizing whether the company’s aggressive investments in generative AI, automation, and workflow enhancements will yield tangible revenue gains or further dilute margins in a fiercely competitive environment.

• Revenue Growth: Still positive, but moderating amid macro headwinds.

• Profitability: Operating leverage challenged by high R&D and acquisition costs.

• Cash Flow: Remains strong, but free cash flow yield is compressing as capex rises.

The Broader Narrative: Industry Headwinds vs. AI Opportunity

Sector Backdrop and Competitive Dynamics

The broader SaaS and enterprise software sector faces slowing digital transformation budgets as customers rationalize spending. Meanwhile, the rapid adoption of AI-powered solutions offers a secular tailwind for category leaders, but the near-term market remains highly fragmented and price-sensitive.

Recent news cycles reinforce both the promise and the pitfalls:

• InvestorPlace: Lists Salesforce among "5 Stocks to Buy the Dip" citing AI potential, but acknowledges that execution risk and integration challenges remain elevated.

• Newsfile Corp.: Dual coverage of AI benefits and CRM underutilization underscores a dichotomy: while the technology is powerful, actual customer adoption is lagging expectations.

Analyst and Peer Opinions

Several industry experts have noted that Salesforce’s premium valuation is difficult to justify in the absence of accelerating growth. Blockquotes from sector analysts reflect a growing consensus:

"CRM’s pivot to AI is a necessary evolution, but the payoff will require patience. Near-term, the risk is to the downside if adoption rates don’t inflect upward." — Sector Analyst, InvestorPlace

"The market is recalibrating expectations for SaaS leaders. Execution on AI monetization—not just product launches—will separate winners from laggards in 2025." — DeepStreet.io SaaS Specialist

Looking Forward: Key Risks and What to Monitor

• Execution on AI Strategy: Investors will closely watch Salesforce’s ability to convert AI innovation into measurable customer wins and upsell opportunities.

• Customer Engagement Metrics: Improvement in CRM utilization rates would be a bullish signal; further stagnation could validate DA Davidson’s bearish stance.

• Margin Trajectory: Operating leverage will be under pressure if the company continues to invest aggressively in R&D and sales without clear near-term payoff.

• Sector Rotation: As tech valuations adjust, Salesforce’s leadership position could be tested by both legacy peers and nimble disruptors.

DeepStreet.io Bottom Line

DA Davidson’s downgrade of Salesforce to "Underperform"—with a $200 price target—should not be dismissed as a routine sentiment shift. The firm’s history of timely calls in software and technology lends credibility to its bearish view, particularly with CRM’s technicals deteriorating and sector-wide utilization challenges coming to the fore. While AI-driven automation remains a compelling long-term growth driver, the near-term setup is fraught with execution risk and market skepticism.

For self-directed investors, the key is to balance Salesforce’s undeniable strategic strengths against the real and present risks of further downside. The next two quarters will be critical in determining whether the company can reignite growth and restore confidence, or if more price pain lies ahead.