Why Are Adobe Shares Trading Higher? Morgan Stanley Likes Firefly

Shares of Adobe Inc ADBE are trading more than 3% higher Monday after Morgan Stanley MS upgraded the stock. Here's what investors need to know.

The ADBE Analyst: Keith Weiss upgraded Adobe from Equal-Weight to Overweight, and raised the price target from $510 to $660.

The ADBE Takeaways: The upgrade demonstrates the investment bank's growing confidence in Adobe’s capacity for growth. Adobe demonstrates an ability to capitalize on advancements in technology, particularly Generative AI (GenAI).

Adobe's GenAI is not just driving product innovation, Weiss says. It’s expected to improve the integration of functionality into existing workflows.

Weiss points to Firefly, along with other enhancements to flagship applications, as catalysts for increased revenue and earnings.

Weiss identified five opportunities for San Jose, California-based Adobe to monetize GenAI capabilities. One is the launch of new products and the implementation of a new consumption model. Another includes enhancements to flagship products and increased enterprise adoption.

Adobe's opportunities are projected to generate an additional $1.99 billion in revenue by fiscal 2025.

The investment bank also revised its predictions for Adobe’s earnings, with its new forecast suggesting a Compound Annual Growth Rate (CAGR) of 17% for Adobe’s EPS from fiscal 2022 to fiscal 2025, an upgrade from the previously anticipated 14%.

Morgan Stanley’s upgrade also considers Adobe’s strong standing in the software industry. The company’s dominant position with its core Creative Professional customer base, the expanding potential of the Document Cloud, and its leadership role in consolidating the CMO’s office with the Digital Experience platform, all contribute to justifying the premium rating.

ADBE Price action: Shares of Adobe are trading 3.16% higher to $545.70, according to data from Benzinga Pro.

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