On Friday, Citi analyst Tyler Radke adjusted the price target on Adobe stock (NASDAQ:ADBE) to $430 from the previous $490 while maintaining a Neutral rating on the shares. According to InvestingPro data, the stock has fallen nearly 16% in the past week, trading near its 52-week low of $374.50, with analyst targets ranging from $390 to $650. The revision follows Adobe’s first-quarter results, which Radke described as "controversial." The modest earnings beat was overshadowed by changes in disclosure practices, which now obscure the momentum of the core Creative Cloud suite. Despite concerns, Adobe maintains impressive gross profit margins of 89% and operates with moderate debt levels. Additionally, for the first time in years, the company reported a decline in combined Remaining Performance Obligations (cRPO/RPO) bookings.
Adobe’s recent quarterly report also revealed that despite surpassing some financial metrics, the company has not altered its fiscal year 2025 outlook. Moreover, second-quarter guidance indicates a one-point miss in Digital Experience (DX) subscription growth. The analyst suggests that the stock’s negative reaction may be due to diminishing confidence in Adobe’s near-term growth prospects, which rely on an AI-driven strategy and enterprise cross-cloud upsell in an increasingly uncertain macroeconomic environment.
Radke pointed out that Adobe’s Creative Cloud franchise appears to be experiencing a slowdown in growth and is facing heightened competition. The lowered price target to $430 reflects slightly reduced estimates and is based on a 19 times fiscal year 2025 estimated enterprise value to free cash flow (EV/FCF) multiple.
Adobe’s first-quarter performance and subsequent guidance have raised concerns about the company’s growth trajectory, especially as it attempts to navigate a more challenging economic landscape. The company’s effort to leverage AI and expand enterprise offerings will be closely watched as it strives to maintain its position in the competitive cloud software market. InvestingPro analysis suggests Adobe is currently undervalued, with 15+ additional ProTips and a comprehensive Pro Research Report available for deeper insights into the company’s prospects.
In other recent news, Adobe’s earnings and revenue updates have drawn considerable attention from analysts. RBC Capital Markets described Adobe’s first-quarter results as robust, though they adjusted their price target from $550 to $530, citing peer multiple compression. Meanwhile, DA Davidson also reduced their price target from $625 to $600, despite Adobe’s performance surpassing expectations for the fiscal year 2025. Similarly, TD Cowen lowered its price target to $490 from $550, reflecting concerns over Adobe’s net new annualized recurring revenue trends. BMO Capital followed suit, cutting the price target to $495 while maintaining an Outperform rating, noting the company’s consistent guidance for fiscal year 2025.
Piper Sandler, however, maintained a positive outlook with an Overweight rating and a $600 price target, highlighting Adobe’s strong start to fiscal year 2025 and potential growth in AI product revenue. Adobe’s strategic focus on Generative AI has been a recurring theme, with RBC Capital noting its significance in upcoming company discussions. Analysts are closely watching how Adobe will leverage its AI innovations and new revenue disclosures to enhance transparency and investor confidence. The company’s reaffirmation of its full-year guidance and strategic initiatives remains a focal point for investors seeking insights into Adobe’s future performance.
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