On Thursday, Stifel adjusted its outlook on Adobe (NASDAQ: NASDAQ:ADBE), reducing the stock's price target from $650.00 to $600.00, while reaffirming a Buy rating. The revision follows Adobe's fiscal year 2025 (FY25) guidance, which did not align with the expectations of the sell-side, particularly regarding the top-line driven by a less optimistic view of Digital Media than anticipated.
Adobe's strong performance at the end of the fiscal year was noted, especially in the Digital Media and Digital Experience segments. However, the FY25 guidance provided by the company fell short of expectations, which had been heightened due to anticipated revenue from general artificial intelligence (genAI) monetization and potential pricing actions.
Looking ahead to calendar year 2025, Stifel's focus shifts to Adobe's strategy of introducing higher-tiered offerings, including packages featuring the Firefly Video Model, aimed at driving average revenue per user (ARPU) growth. This approach is seen as an alternative to direct pricing strategies.
The analyst highlighted a discrepancy observed by the market: while Adobe's Digital Media Annual Recurring Revenue (ARR) growth forecast was solid, the revenue guidance for Digital Media was the primary factor behind the stock's 9% drop in after-hours trading. This aspect, according to the analyst, was not fully appreciated by the Street prior to the earnings call.
In conclusion, while Stifel continues to support Adobe with a Buy rating, the firm has revised its price target to $600, taking into account the recent guidance and market reactions.
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