12:00 PM EDT, 05/30/2024 (MT Newswires) -- Salesforce's ( CRM ) weak Q1 bookings performance continues to test investor patients and is now becoming a point of competitive concern, Morgan Stanley said in a note on Thursday.

"Demand trends in Q1 returned to the overall sluggish environment that has persisted over the past two years -- longer deal cycles, increased budget scrutiny and less seat expansion, which combined with go-to-market changes, yielded a larger disruption in the quarter," Morgan Stanley said.

Despite a weaker Q1, the company sustained its fiscal 2025 guidance driven by conservative targets, strong pipeline build, core growth initiatives' success and solid positioning for generative AI-driven demand, according to the note.

"Weak bookings in Q1 further test investor patience as the GenAI innovation cycle has yet to inflect top-line results and now increasingly becomes a point of competitive concern," Morgan Stanley said.

The firm also said that the impacts are cyclical rather than secular and Salesforce ( CRM ) is undervalued compared with peers despite its strong operational discipline and core enterprise position supporting earnings power.

Meanwhile, Salesforce ( CRM ) demonstrated strong momentum in data cloud and GenAI as its comprehensive portfolio drove significant industry and multi-cloud deals, while improving vendor consolidation, the analysts said.

Morgan Stanley reduced its price target to $320 from $350 and kept its overweight rating.

Shares of Salesforce ( CRM ) fell more than 20% in recent trading.

Price: 215.72, Change: -55.90, Percent Change: -20.58