Adobe Inc. (NASDAQ: ADBE) is all supposed to be about growth from its AI offerings brining a boost to its growth ahead. The problem is that many companies are already seeing a boost, and Adobe’s guidance keeps pushing the benefits out further into the future. Oggonomics has tracked more than dozen price target cuts in the wake of Adobe’s disappointing guidance.
Beating estimates just isn’t good enough in an AI-driven market theme that is followed by soft guidance. That is where Adobe is now. Its forecast of first quarter revenue coming in between $5.63 billion and $5.68 billion was under the consensus of $5.72 billion; and the 2025 forecast of $23.3 billion to $23.6 billion was below the consensus of of $23.8 billion.
The stock was last seen down by 13% at $478.45 in the post-earnings reaction. Its 12.5 million shares that had traded hands by 2:00 eastern time was also already about 4-times its normal daily trading volume.
Strategic investors look for outsized gains ahead to juice overall returns. Adobe has so far not been living up to that hope. Perhaps the only good news after a 13% drop is that its stock is nearing a significant trading band of $460 to $480 that served as a bottom during 2024 except at the end of May and start of June.
Is it possible that Adobe is tempering expectations so that it can over-deliver in 2025? That is not what investors are taking to heart. Adobe is now down almost 20% so far in 2024 when the NASDAQ-100 gains were approaching 30%. And Adobe is supposed to have that wonderful AI-boost to boot.
WHAT WALL STREET SEES
Oggonomics noticed that a couple analysts did not alter their price targets lower. They have their own reasons, but these have all been shown alphabetically to avoid the appearance of any ranking, bias or preference.
Barclays kept its Overweight rating but cut its target to $645 from $675. Its annual recurring revenue (ARR) of $578 million was around its upside scenario of $575 million, and the 11% ARR guidance is also inline with expectations even as revenue was $300 million lower than expected. Barclays likes the idea of tiered FireFly offerings that should help to monetize Adobe’s diverse customer base of professional and casual users.
Bernstein maintained its Outperform rating but cut its price target to $587 from $644. The firm noted that Adobe delivered an in-line quarter and that light guidance is attributable to foreign exchange. Its worry is that investors are finding it hard to reconcile Adobe’s bullish AI commentary when it also comes with soft results and growth guidance.
BofA Securities maintained its Buy rating but cut its price objective to $605 from $640. The firm notes that it now looks like “proliferation first, monetization later” but still sees encouraging leading indicators as Q4 net new digital media at $572 million annual recurring rate exceeded guidance by $22 million (even if it was under Q3 upside of $62 million). Adobe’s move to new tiered subscription offerings may be driving a near-term revenue headwind, while a flatter monetization ramp on Firefly AI and lacking price increases this year may be drags. Its Firefly services and AI also contributed positively and suggests larger more strategic deals across its broader Adobe enterprise offering can help.
CFRA reiterated its Buy rating and kept its $630 price target as is. It cut 2025 EPS down to $20.35 from $20.74 and sees 2026 at $23.25 EPS. While its 025 outlook was under expectations and implies revenue deceleration, it admits some concerns over how can monetize AI. CFRA likes how the progress of GenAI Firefly models look and Firefly has now crossed 16 billion cumulative generations.
Deutsche Bank kept its Buy rating but cut its price target to $600 from $650. While there were many very important and positive updates, the firm feels the message was lost in the noise around guidance signaling a more back-end loaded 2025 picture. The lack of committal to up front growth next year is now fueling the bearish narratives around the health of core Creative sales.
Jefferies maintained its Buy rating but cut its price target to $650 from $700. While earnings beat and some guidance was close enough for 2025, the guidance was just not the clearing event that investors had been hoping for after a disappointing 2024 stock performance. Despite the questions and uncertainty, Jefferies is still standing by its belief that Adobe will be an AI winner in the long-term.
Mizuho kept its Outperform rating but cut its price target to $620 from $640. It noted many investors believed the company’s new digital media revenues would do slightly better than reported and the conservative fiscal 2025 outlook comes after it has already been a frustrating stock in 2024. Mizuho still remains confident that Adobe will significantly monetize its GenAI innovations going forward.
Morgan Stanley remained at Overweight and kept its $660 price target as is. This was one of the few reports that did not see a price target cut. The firm did admit it is frustrated with Adobe’s communications, but noted that the risk-reward remains attractive and is coupled with increasing optimism on GenAI monetization ramping up in 2025. The $660 price target rolls forward for its valuation to 2026 but at a lower 28 P/E of $23.48 per share.
Oppenheimer maintained its Outperform rating but cut its price target to $600 from $625. While its Q4 results were decent, net new Creative Cloud ARR only showed modest growth and the 2025 guidance was below expectations (specifically on new Digital Media ARR). Oppenheimer maintains that investors are likely to perceive that more competition in the low-end of the market, along with a slow monetization path for the AI technologies, are also adversely impacting Adobe’s growth opportunities.
Stifel kept its Buy rating but cut its target to $600 from $650. This more aggressive cut is as expectations around genAI monetization and pricing actions (higher) may have driven 2025 numbers higher coming into the quarter. Bringing higher-tiered offerings to market may also help drive average revenue per user growth more than simply raising prices.
TD Cowen downgraded Adobe to Hold from Buy and slashed its target to $550 from $625. This downgrade may have acted as the one stick in the mud that may have thrown a wrench into the “strategic story” for investors. While net new annual recurring revenue beat its guidance by 5%, this was the lowest beat since Q4/2022. The firm also worries about the 8% to 10% growth guidance being under consensus estimates as that’s not the norm for Adobe. The firm also pointed out that Adobe’s prioritization of artificial intelligence adoption over actual monetization (sales and earnings) is causing the growth deceleration and that growth could even fall down into the single-digits. The firm does note that pricing tailwinds will likely fade in 2025, but its new go-to market changes bring some disruption risk and recent analyst checks were more mixed than positive.
Some additional calls were seen as well:
- BMO (Outperform) target to $570 from $600
- DA Davidson (Buy) target to $625 from $685
- Piper Sandler (Overweight) target to $600 from $635
- RBC (Outperform) target to $590 from $610
- UBS (Neutral) target to $525 from $550
IN THE END
Oggonomics always reminds its readers that no single analyst call, or even a bunch of analyst calls in a single day, should ever be used as the sole basis in deciding to buy or sell stocks. That said, it was not hard to see just how much the price targets have come down on top of Adobe’s stock performing far less than expectations in 2024. These analyst views are taken from research reports and summarized and the opinions and views are from each firm. Oggonomics maintains no formal ratings and has no formal price target for Adobe or other companies in this report.
