On Friday, BofA Securities adjusted its outlook on Adobe (NASDAQ:ADBE), reducing the price target of the shares to $640 from the previous $700. Despite the downward revision, the firm maintains a Buy rating on the stock. The change in price target comes as Adobe focuses on expanding the use of AI, with the intention of later monetization.
The analyst from BofA Securities noted that Adobe's softer upside was partly attributed to challenging comparisons due to a previous price increase. However, the pivot towards proliferating AI technology for future revenue generation is seen as the primary factor. This strategic move aligns with trends observed in other software platforms.
Adobe's recent metrics indicate progress in its AI proliferation strategy, with 6.5 billion images created on its Firefly platform, an increase of 2 billion since the end of the fourth quarter. This growth trajectory is consistent with the substantial 2.5 billion increase seen in the prior quarter. The expanding user engagement is believed to provide a robust foundation for potential upsell opportunities.
Furthermore, BofA Securities highlighted upcoming launches of more credit-intensive AI services by Adobe, such as text-to-video and music composition features. These new services are expected to launch later this year and are anticipated to drive significant credit usage and contribute to incremental revenue for the company.
The analyst's commentary underscores a broader shift within the software industry towards strategies that leverage AI for long-term financial benefits. Adobe's continued innovation and the anticipated launch of new AI services are seen as pivotal developments that could underscore the success of its strategic pivot in the latter part of the year.
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