Adobe Shares Drop After 'Disappointing Guidance': 3 Analysts Evaluate Q4 Results

Shares of Adobe Inc ADBE tanked by more than 14.2% to $489.38 at the time of publication on Friday, after the company reported fiscal first-quarter earnings.

The results came amid an exciting earnings season. Here are some key analyst takeaways from the release.

• Stifel analyst Parker Lane maintained a Buy rating, while reducing the price target from $650 to $625.
• JPMorgan analyst Mark Murphy maintained a Neutral rating, while trimming the price target from $600 to $570.
• Goldman Sachs analyst Kash Rangan reaffirmed a Buy rating and price target of $640.

Check out other analyst stock ratings.

Stifel: Adobe reported a “relatively clean” set of results for the fiscal first quarter, but this was “overshadowed by disappointing guidance around net new Digital Media ARR and resulting investor skepticism around the achievability of full year targets,” Lane said in a note.

“Despite consistent innovation and positive commentary around the generative AI opportunity, management's belief that the benefit from new solutions will be felt more in 2H24 isn't enough to satisfy investors attracted to Adobe for its AI potential,” the analyst wrote. He added that the company will shed light on its generative AI roadmap when it hosts its annual Summit conference later this month.

JPMorgan: Adobe’s earnings call supported “our sense that many emerging catalysts to growth, including pricing and GenAI credit tailwinds, would likely be back-half weighted, creating a more favorable exit velocity in ARR trends later this year,” Murphy said. He added that the company is passing the growth baton from Creative Cloud to Document Cloud at a faster rate than expected.

“Based on recent partner conversations, we had also noted feedback that new GenAI tools were causing some organizations to pause and assess which creative content products are most critical for incremental spend,” the analyst further wrote.

Goldman Sachs: “Despite outperforming Consensus on DM NNARR, the stock is -11% in after-hours trading,” Rangan wrote in a note. He added that the pressure on the stock represents skepticism around the company being able to meet its full year Digital Media net new annual recurring revenue (NNARR) of $1.9 billion.

“However, we think this metric will continue showing 2H strength (as it has historically), predicated on continued product adoption and pricing leverage,” the analyst wrote. He further said that the company may be able to exceed its DM NNARR target for 2024.

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