Salesforce: Downgraded on AI Doubts
KeyBank cut Salesforce to sector weight from overweight, moving to the sidelines, and investors sold the stock on the call. The analyst openly admits the timing could be wrong, acknowledging the stock has already fallen more than 30% this year. The downgrade reflects the broader debate over whether AI is friend or foe to a company like Salesforce: does it create the next growth cycle, or disrupt the company faster than it can adapt? CEO Marc Benioff argues AI is a friend and that Agentforce will keep the momentum and staying power he expects.
The analyst's core concern is the AI payoff. KeyBank spoke with customers and implementation partners, who aren't showing the momentum investors would expect. The biggest worry centers on Agentforce, Salesforce's agent platform: many customers remain in the proof-of-concept stage, still testing whether it works rather than deploying AI broadly across their businesses. The excitement, interest, and curiosity are there; meaningful revenue acceleration is the open question. More analysts have been moving off a constructive stance, a blow Salesforce didn't need.
The stock ran from 369 the prior December and now sits near a 52-week low, hovering above the 146 level at 158. The report headline warns that Salesforce may look like a bargain but it's a mirage, exactly the headline a company doesn't want at its lows. Salesforce entered the Dow in 2020, and there's a longstanding notion of a "curse of the Dow" for newly added members.
Pepsi: Beat on Revenue, Missed on Earnings
Pepsi shares fell 4.8% on a mixed picture. Adjusted EPS came in at 2.20 against the street's 2.21, a miss, while revenue topped estimates at 24.1 billion, up 6%. International demand was solid, but it was offset by softer-than-expected North American business, where beverage volumes fell 4% and food volumes were flat even after planned discounting.
The CEO and CFO both flagged a consumer under pressure. Tight household budgets and continued inflation are squeezing spending, and this quarter felt tighter than expected, with consumers pulling back. Pepsi has spent the past two years fighting weak demand triggered partly by its own multiple rounds of price increases. It has responded with price cuts on brands like Lays chips and Doritos, and refreshed brands like Gatorade. It also faces the impact of GLP-1 drugs and has pushed protein-first snacks in response. Management expects North American volume to take longer than anticipated to recover.
A telling signal came a day earlier when Goldman Sachs raised its Coca-Cola price target to 82.76 right before Pepsi's report. Coca-Cola also won Marriott International hotels as a beverage partner this week, a deal Pepsi would not want to see after what was likely a hard-fought battle between the two.
Levi's: Strong Quarter, Higher Guidance
Levi's beat on both lines, though its shares had been an outperformer coming into the day, which may explain a muted reaction from investors who expected even more. Adjusted EPS hit 28 cents versus 24 cents expected, and revenue reached 1.56 billion against the 1.52 billion street estimate. Levi's raised its full-year sales and profit outlook and boosted its dividend.
Direct-to-consumer rose 11%, wholesale rose 5%, and Beyond Yoga jumped 16%, so demand is clearly present. The CFO said half of expected sales growth will come from higher prices and half from higher unit sales, a balanced mix of price and volume. The CEO added that two-thirds of this quarter's sales growth came from selling more products rather than just charging more.
Earnings season is underway, with major banks reporting next week.
