Salesforce stock drops after long-time bullish Morgan Stanley analyst downgrades

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Shares of Salesforce.com Inc. dropped 1.8% in premarket trading Thursday, after Morgan Stanley analyst Keith Weiss backed away from his long-time bullish stance, citing a “lack of confidence” in the enterprise software company’s ability to significantly expand margins. Weiss said that concern keeps the stock’s risk-versus-reward profile balanced, pushing him to downgrade the stock to equal weight, after being at overweight for at least the past five years. He kept his stock price target at $275, which is just 8.2% above Wednesday’s closing price of $254.18. “Given the current scale of Salesforce and a growth strategy heavily incorporating M&A, we believe a sharper focus on EPS growth will likely be needed to drive shares materially higher from here,” Weiss wrote in a note to clients. “However, subscription model dynamics and management’s growth philosophy may make that difficult near term,” leading him to downgrade the stock. Salesforce’s stock has run up 32.0% over the past three months through Wednesday, enough to make it the best performer among Dow Jones Industrial Average components over that time period.
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