On Thursday, DA Davidson adjusted its outlook on Adobe (NASDAQ: NASDAQ:ADBE), reducing the stock's price target to $625 from the previous $685 while keeping a Buy rating on the shares. The firm's analyst cited Adobe's fourth-quarter fiscal year 2024 performance, which surpassed expectations, with revenue and earnings outperforming consensus estimates.
The company's management discussed the potential of artificial intelligence (AI), acknowledging that while AI is a promising area, its monetization remains in the initial stages.
Adobe's forecast for fiscal year 2025 indicated a revenue growth of approximately 9% (or about 10% on a constant currency basis). DA Davidson views this projection as conservative, considering Adobe's opportunities to leverage its growth drivers. These include the ability to monetize the value it provides to enterprise customers and the expansion of its freemium offerings.
The analyst noted that the company's current remaining performance obligations (cRPO) growth has picked up pace this quarter, and record bookings reinforce a positive stance on the stock's future.
Despite the positive performance indicators, the price target has been revised downward to reflect a more cautious valuation of 27 times the projected earnings per share (EPS) for fiscal year 2026. The analyst believes that the revised target still supports a Buy rating due to the company's solid fundamentals and the potential for growth through various channels.
Adobe's management has expressed optimism about the company's direction, especially with advancements in AI technology. However, they remain realistic about the current stage of AI revenue generation, indicating that it is an ongoing process.
The company's strategic moves and product offerings are expected to drive growth and provide value to its enterprise clients, which DA Davidson suggests could lead to potential upside in the stock's value over time.
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