Shares of the diversified software company Adobe (NASDAQ:ADBE) have risen nearly 42% year-to-date despite a tight enterprise spending environment. Much of this growth can be attributed to investors’ enthusiasm for AI (Artificial Intelligence).
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It’s worth highlighting that ADBE is rapidly embedding generative AI features in its offerings, strengthening its competitive positioning and expanding its addressable market.
Analysts See Adobe as a Beneficiary of AI
During the Q2 conference call, Adobe said it released an all-new Adobe Express with Firefly’s generative AI capabilities. Further, the company added that its generative AI offerings bring multiple new monetization opportunities.
Validating the company’s view, Goldman Sachs analyst Kash Rangan believes that the availability and monetization of Adobe’s generative AI products in the second half of 2023 could drive user growth and lift its average revenue per user.
Rangan, in a note to investors dated June 15, said that the company is focusing on driving adoption of its new AI offerings through a freemium version and will benefit from “price increases to its broader platform suite longer-term.” The analyst believes that its generative AI platform opens up +$4 billion in TAM (total addressable market) for the company, led by increased user spend, a higher retention rate, and monetization strategies.
Besides for Rangan, BMO Capital analyst Keith Bachman also remains upbeat about Adobe’s positioning in the AI space. Bachman upgraded Adobe stock to Buy from Hold on June 21, and increased the price target to $570 from $500.
The analyst expects Adobe to acquire new users and capture higher pricing through generative AI offerings.
Echoing similar sentiments, Brian Schwartz of Oppenheimer has a positive view of Adobe’s future due to its AI offerings. However, Schwartz finds ADBE’s risk/reward fairly balanced near its current levels. Schwartz reiterated a Hold on ADBE stock on June 16.
Is Adobe Stock a Buy or Sell?
Adobe’s better-than-expected Q2 earnings, upward revision in guidance, and new generative AI offerings position it well to deliver solid financials in the coming quarters. Nevertheless, pressure on enterprise spending in the near term and regulatory hurdles over its Figma deal keep analysts cautiously optimistic about its prospects.
Adobe stock sports a Moderate Buy consensus rating on TipRanks based on 17 Buy and 11 Hold recommendations. Analysts’ average price target of $547.26 implies an upside potential of 14.61%.
Investors should note that Alex Zukin of Wolfe Research is the most accurate analyst for ADBE stock, according to TipRanks. Copying Zukin’s trades on ADBE stock and holding each position for one year could result in 88% of your transactions generating a profit, with an average return of 30.6% per trade.
