On Monday, Citi has adjusted its price target on Adobe (NASDAQ:ADBE) shares, now aiming for $628, a slight decrease from the previous $632 target. The firm retains a Neutral stance on the stock. The adjustment comes as Adobe is expected to deliver a robust first fiscal quarter, driven by consistent new user sign-ups, product upsells, and approximately $70 million in revenue from recent price hikes.
Adobe's stock performance has not matched that of its peers, having declined by 9% year-to-date, in contrast to Salesforce (NYSE:CRM)'s approximate 15% gain.
The market's reaction seems influenced by concerns over OpenAI's latest video generation model, Sora, which introduces potential competitive challenges. However, Citi anticipates that these industry shifts are not likely to affect Adobe's short-term financial results, though they acknowledge increased uncertainty in the long run.
The core Digital Media (DM) business of Adobe presents opportunities for the first quarter and fiscal year 2025 figures to surpass expectations, considering the company's cautious forecast and the expansion of price increases to additional geographic regions, which took effect on March 5th.
Despite a positive outlook heading into the earnings announcement, Citi's Neutral rating remains unchanged. The rationale behind this decision is the prospect of intensified competition in generative AI, which could lead to a reevaluation of Adobe's market valuation.
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