The investment firm maintained a $275 price target for the San Francisco company, indicating 8% potential upside from the stock's previous closing price.
"At CRM's current growth, scale and market cap, an increasing focus on [free cash flow] and earnings is likely necessary for further price appreciation," said Morgan analyst Keith Weiss.
"However, subscription model dynamics and management's growth philosophy may make that difficult near-term, pushing us to an [equal-weight] rating."
The firm notes that with a $250 billion market capitalization, Salesforce is in the peer group with Adobe (ADBE) - Get Report, Intuit (INTU) - Get Report and Microsoft (MSFT) - Get Report, which are all valued primarily on a price-to-earnings basis by investors.
However, given the current scale of Salesforce and a growth strategy that is heavily incorporating mergers and acquisitions, Weiss says, Salesforce needs to focus more on earnings-per-share growth to drive shares higher.
"The good news is our updated [software-as-a-service] X-ray suggests Salesforce currently has the unit economics to drive operating margins to 28% in 5 years (based on our growth estimates) and 33% in 10 years, as growth slows towards 10%," Weiss said.
Morgan Stanley's model supports a path to nearly $40 billion in revenue for Salesforce by 2024.
But a lack of confidence in significant margin expansion leaves the investment firm "unable to push our current price target of $275 higher."
Salesforce shares at last check were 1.4% lower at $250.63.