Adobe Stock To Turn From Laggard To Leader, Analysts Highlight 'AI Monetization Opportunities' From MAX Creativity Conference

Analysts see Adobe Inc ADBE benefitting from new product announcements and a focus on GenAI value add-ons unveiled at the company’s MAX 2024 Creativity Conference this week.

The Adobe Analysts: JMP Securities analyst Patrick Walravens maintained a Market Perform rating with no price target.

Piper Sandler analyst Brent Bracelin maintained an Overweight rating with a $635 price target.

JPMorgan analyst Mark Murphy maintained an Overweight rating with a $580 price target.

Goldman Sachs analyst Kash Rangan reiterated a Buy rating with a $640 price target.

Stifel analyst J. Parker Lane maintained a Buy rating with a $650 price target.

RBC Capital analyst Matthew Swanson maintained an Outperform rating with a $610 price target.

BMO Capital analyst Keith Bachman maintained an Outperform rating with a $580 price target.

KeyBanc Capital analyst Jackson Ader maintained an Underweight rating with a $450 price target.

JMP on Adobe: The software company featured four key product announcements during Day One of the creativity conference and showed off artificial intelligence integration, Walravens said in a new investor note.

The analyst said Adobe is seeing traction with the number of APIs and growth thanks to artificial intelligence, but it might not be enough in a highly competitive space.

"Adobe is not the only company attempting to disrupt traditional digital creation with AI and faces intense competition from the likes of Canva," Walravens said.

A court case of The New York Times vs. Microsoft and OpenAI is being closely monitored by the analyst as it could have "significant implications" to Adobe's AI models approach.

"Adobe acknowledges that it is ‘early in understanding all the dynamics for monetizing' AI and that it may have to adjust its pricing in the future to accommodate these dynamics."

Piper on Adobe: The software company could go from laggard to leader with the latest product unveiling, Bracelin said in a new investor note.

"We remain buyers of ADBE. The litany of new AI-powered features and new innovative products unveiled at Adobe MAX in Miami reinforces our bullish view on ADBE as a contrarian growth idea to buy into year-end.

The analyst said Adobe stock has trailed peers and it could be time to catch up.

Adobe's new AI feature reveals at the conference are "too long to list," the analyst added.

With new guidance changes, the analyst said investors can focus on the company's software scale, double-digit top-line growth and high-margin model.

JPMorgan on Adobe: The company's announcement of a new Firefly Video Model is likely to get the most investor and public attention, Murphy said in a new investor note.

"Overall, we come away positive on Adobe's ongoing innovation, product rollouts, and GenAI-related developments, while still expecting newer growth initiatives will take some time to ramp and that revenue growth is in some stage of transition," Murphy said.

The analyst said Adobe is laying the foundation for long-term growth with a focus on new user acquisition over near-term monetization.

"We continue to lean favorably on Adobe fundamentals given its fairly durable growth rates, incremental AI monetization opportunities over time, and largely favorable customer and partner checks."

Goldman Sachs on Adobe: GenAI is a long-term growth tailwind for Adobe, Rangan said in a new investor note.

"We leave the conference increasingly confident in Adobe's ability to rapidly innovate and deliver meaningful productivity boosts to users with AI and collaboration innovations, thus driving long-term sustainable user growth, higher retention, and pricing leverage," Rangan said.

The analyst said Adobe is "well positioned to address" the growing demand in the creative fields.

"Product announcements reinforced Adobe's ability to compete across a wide variety of creative mediums, particularly video, with Firefly Video, the first publicly available video model for commercial use."  

Adobe's addressable market could be growing with new products and the creative field expanding, Rangan added.

"We reiterate our view that Adobe is one of the highest quality software assets."

Stifel on Adobe: The software company is expanding its position in enterprise accounts with the new Firefly Video Model, Lane said in a new investor note.

"We note an overall sense of excitement and usage around Firefly, and based on our customer checks, Adobe appears to be continuing its industry leadership," Lane said.

RBC Capital on Adobe: The event highlighted the company's focus on the evolution of creative with generative AI adding value, Swanson said in a new investor note.

The analyst said Generative AI commentary from the company "remains qualitative" and Adobe is in the early innings of monetization.

"We continue to think that collaboration and integration across the Clouds bring unique value within the enterprise market," Swanson said.

BMO Capital on Adobe: The highly anticipated introduction of the Firefly Video model was the highlight of the event and could offer "significant long-term" revenue growth opportunities, Bachman said in a new investor note.

"Adobe announced many new products and features within Photoshop, Illustrator, Premiere Pro and Frame.io, which we think can sustain Adobe's leadership at the high end of the creative market," Bachman said.

While Adobe's decision to get rid of quarterly ARR guidance could be viewed as a negative, Bachman said this metric "can be lumpy" and annual guidance could help smooth things over.

"We believe video offers an opportunity for Adobe to realize pricing/mix uplift either through credits or higher subscription prices/add-ons over the long-term."

KeyBanc on Adobe: The key takeaway from the event for Ader is the guidance change for ARR from quarterly to annual.

"We are of two minds: our one mind says that any time transparency moves against us, that is bad because these things generally only go one way; our other mind agrees with management that the quarterly variability is probably too myopic," Ader said.

The analyst said the change shouldn't impact transparency, instead just reduce the noise.

ADBE Price Action: Adobe stock trades at $507.79 on Tuesday versus a 52-week trading range of $433.98 to $638.25. Adobe stock is down 11% year-to-date in 2024.

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