ADBE Stock: Adobe Looks To Monetize Generative AI

Adobe

Adobe

ADBE

$5.97



1.23%



50%

IBD Stock Analysis

• Shares recently broke out of a 42-week cup base with buy point at 451.15
• Stock climbed up to 518.74 before pulling back; still above chase zone
• Pullback and bounce off 21-day average could provide a new buy point

Composite Rating

Industry Group Ranking

Emerging Pattern

Pullback

* Not real-time data. All data shown was captured at
1:06PM EDT on
07/06/2023.

Adobe (ADBE) is the IBD Stock Of The Day as the maker of digital media and marketing software works to monetize its innovations in generative artificial intelligence. ADBE stock is a recent breakout.

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On June 9, ADBE stock broke out of a 42-week cup base at a buy point of 451.15, according to IBD MarketSmith charts. It climbed as high as 518.74 on June 16 before pulling back. Adobe is still trading above the 5% buy zone of its breakout.

For the past two weeks, ADBE stock has been trading in a tight range. Shares could be forming a three-weeks-tight pattern. A pullback and bounce off its 21-day exponential moving average would provide a new buy point as well, according to IBD analysis.

In afternoon trades on the stock market today, ADBE stock fell 1.2% to 481.29.

ADBE Stock Gets Lift From Generative AI

A steady stream of news around innovations in artificial intelligence fueled Adobe’s recent stock climb. And ADBE stock popped to a 52-week high after the company posted better-than-expected results for its fiscal second quarter ended June 2.

On a conference call with analysts, Chief Executive Shantanu Narayen said Adobe is well-positioned to lead the “new era of generative AI” with its expertise in creative software and digital content workflows.

Generative AI can create content — including written articles, images, videos and music — from simple descriptive phrases. Artificial intelligence systems analyze and digest vast amounts of data to create new works. Generative AI also can write computer programming code.

In recent months, Adobe has added generative AI capabilities to its Creative Cloud and Experience Cloud platforms. Wall Street analysts are waiting for more details on how Adobe plans to monetize those innovations with its user base.

Figma Acquisition In Doubt

One overhang on ADBE stock is the company’s planned $20 billion acquisition of Figma, a web-first collaborative design platform. Adobe announced the deal last September but it has faced regulatory challenges in the U.S., U.K. and European Union.

In a recent report, William Blair analyst Jake Roberge reiterated his outperform rating on ADBE stock.

“While we acknowledge that a prolonged legal dispute regarding the Figma acquisition adds a layer of complexity to the Adobe story, we continue to be long-term believers in the stock,” he said.

Adobe’s core creative software franchise will provide “durable double-digit growth” for the next few years, even without Figma, he said. Further, Adobe has lucrative opportunities in generative AI, the continued digitization of historically offline industries, and the democratization of design software for nontechnical users through Adobe Express, Roberge said.

Adobe ranks first out of six stocks in IBD’s Computer Software-Desktop industry group, according to IBD Stock Checkup. Also, ADBE stock has a best-possible IBD Composite Rating of 99.

ADBE stock is on the IBD Big Cap 20 and Tech Leaders stock lists.

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.

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