Wall Street investment bank Morgan Stanley (MS) has downgraded the stock of creative software firm Adobe (ADBE).
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Keith Weiss, a top five-star rated analyst at Morgan Stanley, says he remains concerned about Adobe’s push to adopt artificial intelligence (AI) and add it to the company’s suite of software products that includes Illustrator and Photoshop. So far, Adobe’s adoption of generative AI hasn’t yielded many benefits, argues Weiss.
As a result, Morgan Stanley has lowered its rating on ADBE stock to a Hold-equivalent equal-weight from a Buy-equivalent overweight previously. The bank also cut its price target on Adobe’s shares to $450 from $520 previously.
AI Rebrand
ADBE stock has struggled as analysts and investors have grown nervous about the impact AI-generated images and creative design will have on the company’s business and future results. Adobe has responded by rebranding itself as an AI-centered company. CEO Shantanu Narayen said in the company’s most recent earnings release that Adobe is “the leader in the AI creative applications category.”
Analyst Weiss questions whether Adobe’s push into AI is playing out as hoped. In a note to clients, he highlighted a deceleration in digital media annual recurring revenue, or revenue attributed to Adobe’s subscription-based services. The decline “has driven outsized concern on Adobe’s ability to prove GenAI net expansive to its total opportunity,” wrote Weiss. ADBE stock is down 21% this year.
Is ADBE Stock a Buy?
Adobe stock has a consensus Moderate Buy rating among 28 Wall Street analysts. That rating is based on 18 Buy, eight Hold, and two Sell recommendations issued in the last three months. The average ADBE price target of $458.12 implies 30% upside from current levels.
