On Thursday, Deutsche Bank reaffirmed its Buy rating and $650.00 price target for Adobe Systems Incorporated (NASDAQ:ADBE). The financial institution anticipates that Adobe's first-quarter Digital Media Net New Annual Recurring Revenue (DM NNARR) will likely surpass the conservative full-year 2024 guidance provided by the company.
Adobe is scheduled to report its F1Q earnings on the upcoming Thursday, March 14, 2024, and the results are expected to influence the company's performance trajectory for the remainder of the year.
The forecast from Deutsche Bank suggests that Adobe could exceed its guidance by approximately 10%, similar to the pattern observed in the last four quarters, rather than the 5% outperformance seen in fiscal year 2022.
The analysts predict the F1Q will benefit from a full quarter of Creative Cloud price increases and positive momentum from the Express product across the mid-market and enterprise segments. However, they also note that significant contributions from newer offerings like the Acrobat AI Assistant subscription, Firefly models, or generative credit packs are not expected until the second half of the year.
In terms of Adobe's Digital Experience (DX) segment, Deutsche Bank anticipates results that align with the current stable demand environment. The company's platform approach is believed to be a key factor in its sustained success, particularly with consistent run-rate deals.
The focus for investors, beyond the F1Q results, will likely be on the progress of products like Firefly and Express, commentary on organic innovation with a spotlight on video in the wake of OpenAI's Sora release, and the company's strategy for capital allocation following the terminated merger with Figma.
Adobe's partners, as per Deutsche Bank's discussions, have expressed optimism regarding the Acrobat AI Assistant, highlighting its potential indispensability for power users in fields such as law and procurement. They also pointed out that the impending deprecation of third-party cookies could lead to a heightened interest in Adobe's DX analytics solutions in the latter half of the year.
In the medium term, Deutsche Bank expects Adobe to continue benefiting from its strong position in the digital landscape, consistent innovation, pricing power, solid execution, and category leadership. The firm also acknowledges the significant potential for Adobe in the generative AI space, while recognizing there are various factors to consider in this area.
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