Why analysts can’t give up on Adobe even after disappointing sales forecasts

Shares of Adobe (ADBE) fell on Thursday after the company’s results the previous day included a disappointing revenue outlook, but analysts still have largely optimistic, if tempered, expectations for the company’s monetization of artificial intelligence (AI).

The Creative Cloud company “was a frustrating stock for much of FY24,” analysts at Mizuho Americas said in a note on Thursday. The company maintained its “Outperform” rating but lowered its price target to $620 from $640. Adobe shares fell up more than 13% shortly after the opening bell and recently traded at $480.37, down 12.6%. The stock is down nearly 20% in 2024.

Higher-priced Firefly AI toolset is coming

Despite the lower price target, Mizuho analysts “remain confident that ADBE will significantly monetize its generative AI innovations in the future,” they wrote.

David Wadhwani, president of Adobe Digital Media, said the company plans to launch a more expensive version of its generative AI toolset Firefly, according to an earnings release provided by AlphaSense. The offering is intended to “monetize new users” and increase average revenue per user, Wadhwani said.

Analysts at Bank of America (BofA) lowered their price target on Adobe from $640 to $605 on Thursday, but also maintained their “buy” rating.

BofA analysts called the most recent quarter the end of a “year of delayed gratification for AI,” although they said they had seen “some encouraging early indicators of a revival heading into next year.”