A Mizuho analyst has upgraded their rating on Adobe stock to Buy, citing strong demand for the software provider’s artificial intelligence (AI) tools and improved fundamentals.
Positive Outlook Ahead of Earnings Report
Gregg Moskowitz’s upgrade from Neutral comes just before the company’s fiscal third-quarter earnings results, scheduled to be released on Thursday. Along with the upgraded rating, Moskowitz also raised the price target on Adobe shares to $630 from $520.
Growing Optimism in the Market
Adobe stock (ticker: ADBE) showed a 0.9% increase to $565.87 in Friday’s trading session. Wall Street has been increasingly optimistic about Adobe, primarily due to the growth potential presented by their AI capabilities.
Firefly – Adobe’s Generative AI Software
In March, Adobe launched Firefly, a generative AI software that can transform simple text into various forms such as images, audio, illustrations, videos, and even 3-D images. Firefly is part of Adobe’s extensive portfolio of AI software tools for businesses and creators. Another notable product is Sensei GenAI, a program designed specifically for marketers.
Analysts Boost Target Price
Analysts at UBS, BofA Global Research, and Wells Fargo have all recently raised their target price on Adobe shares. Furthermore, both BofA and Wells Fargo have upgraded their rating to Buy. The average analyst price target for Adobe shares, according to FactSet, stands at $561.93.
Adobe’s Positive Outlook Boosted by High Customer Interest and Growing Web Traffic
Bolstered by strong customer interest in its GenAI projects and a surge in web traffic, Adobe is set to see a significant boost in its earnings for the Digital Media and Digital Experience segments. Analysts, including Mizuho’s Moskowitz, have upgraded their outlook on the company, citing these positive indicators.
The increasing enterprise customer interest generated by Adobe’s GenAI projects translates to a promising upside for the company’s earnings. Additionally, the anticipated acceleration in web traffic, an improving pipeline, and the likelihood of securing larger deals all contribute to this positive outlook.
However, concerns have been raised regarding Adobe’s ability to finalize its proposed $20 billion acquisition of design software company Figma. The European Commission has initiated an investigation into the takeover, which could pose challenges for Adobe’s long-term growth profile.
Despite these concerns, analysts remain optimistic about Adobe’s performance. FactSet’s survey of analysts indicates an expected earnings per share of $3.97 for the third quarter, with a revenue projection of $4.87 billion.
