Adobe Stock Extends an AI Rally. Wall Street Is Bullish Ahead of Earnings.

While analysts see a chance for Adobe to edge estimates in the quarter, they say that the focus for Adobe is on both the company’s generative AI strategy and the company’s pending $20 billion bid for Figma, which provides collaborative design tools. The deal is under regulatory review in both the U.S. and the UK., with decisions likely to be announced this month. 

Over the last few months, Adobe has made a series of announcements regarding its growing portfolio of generative-AI software. Until now, Adobe has been giving away its new tools on a website called Firefly, where users can experiment with new photo-editing tools, along with a service that can create images from a simple text command, similar to the Dall-e app from ChatGPT creator OpenAI. But last week Adobe made it clear that Firefly is more than simply a set of digital experiments—Adobe thinks generative AI is going to accelerate its growth rate.

Morgan Stanley analyst Keith Weiss on Monday raised his price target on Adobe stock to $470 from $385, and kept an Equal Weight rating. Weiss notes Adobe shares in recent weeks have shifted from investors’ AI loser list to the roster of perceived AI winners. “While reasonable arguments from both AI bulls and bears remain, recognition as a key

Nvidia

(NVDA) partner and product demos of Adobe’s Generative Fill capability [for Photoshop] positively shifted investor perception,” Weiss writes.

The analyst adds that bulls see GenAI “as a way for Adobe to eventually pull the pricing lever given their monopoly status with creative pros,” while bears see the risk of seat reductions to Adobe’s apps “given the increased productivity from Gen AI.”

Jefferies analyst Brent Thill, who maintains a Buy rating on Adobe stock, lifted his target price to $530 from $440. Thill thinks May-quarter financial results will slightly beat Street estimates. “The environment, while not robust, has been holding up as both consumers and businesses have relatively healthy balance sheets and unemployment remains low,” he writes. “Small businesses have been resilient, and enterprises are still spending, albeit with a tighter leash on budgets.” 

Evercore ISI analyst Kirk Materne, who maintains an Outperform rating on Adobe shares, lifted his target price to $475 from $425. He continues to view Adobe “as one of the clear winners in enterprise software as it relates to AI.”

Adobe stock on Monday is 2.6% higher at $465.60.

Write to Eric J. Savitz at [email protected]