Customer relationship management software company Salesforce Inc (CRM  ) is facing "an AI-driven structural reset," according to BofA Securities analyst Tal Liani.

The Salesforce Analyst: Liani reinstated coverage of Salesforce with an Underperform rating and price target of $160.

The Salesforce Thesis: AI "fundamentally" altered the company's long-term growth trajectory, Liani said in the note.

While Agentforce, Salesforce's suite of AI agents designed to support workforce planning and learning across sales, customer service and commerce, is "directionally correct," there are several product challenges, the analyst stated. He added that the suite has a "limited impact."

Salesforce's platform has wide adoption and is embedded into the daily operations of businesses, "yet we expect a structural reset driven by AI transition," Liani wrote. He further said that this raises three core concerns:

  • Muted net new customer additions
  • Limited upsell potential
  • Underwhelming AI monetization pathway
The company is shifting from a high-growth platform to a mature platform that has stable growth of around 10%, the analyst noted.

AI-Related Challenges: Salesforce's growth is at risk as it operated in an AI-native landscape. Agentforce only contributed less than 2% to total revenues in the latest quarter. More than 60% of bookings are being generated by expansions rather than from new customers, Liani pointed out.

"Limited upsell is another challenge, given AI's automation of front-office functions and enterprises' rationalization of seat counts," the analyst wrote. Salesforce's platform does not seem capable of offering opportunities for incremental growth monetization, he added.

Competitive Risks: The report mentions thatAI has led to new competitors emerging, like:

  • Workflow automation tools offered by Alphabet Inc's (GOOG  ) (GOOGL  ) Google
  • ServiceNow Inc (NOW  ) encroaching into customer relationship management
  • Shopify Inc (SHOP  ) competing in commerce
  • Adobe Inc (ADBE  ) getting into marketing
  • Emerging players targeting customer facing and internal workflows.
"While these players often target different subsegments, the net effect is greater overlap, and potential pressure on growth and pricing power," Liani further wrote.

CRM Price Action: Shares of Salesforce had risen by 2.41% to $177.70 at the time of publication on Monday.