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Stock Analysis & Ideas

Adobe: Tapping the Booming Digital Art Industry

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Adobe Inc. (ADBE), a leading design software company, announced the launch of new tools for creators at its annual Adobe MAX event on October 26. The company is planning to significantly expand the versatility of its Creative Cloud, which is a collection of 20+ apps designed and developed to help creators.

The company is embracing the creative economy by catering to the needs of every type of art and artist. Photoshop, Premiere Pro, After Effects, and Lightroom are its leading industry-standard photo, design, and video production tools. The company now intends to capitalize on the rising popularity of digital art by unveiling new tools to help NFT artists create high-quality content.

I am bullish on Adobe stock because of the brand value associated with its creative tools and the favorable outlook for the digital economy. (See Analysts’ Top Stocks on TipRanks)

What Is NFT Art?

A non-fungible token, often known as an NFT, is a digital asset that represents easily replicable items such as art, music, in-game items, photos, and videos. These products, like cryptocurrencies, are stored as a unit of data in a digital wallet and can be bought and traded.

The concept of NFT has been around since 2015, but it gained popularity in 2021 as creators became aware of this technology that allows them to sell items that would otherwise have a limited market. NFTs also allow creators to be paid a percentage of the NFT value for every second sale made.

Another reason for its popularity is that it allows buyers to own the original item with its built-in authentication that establishes a verified and public proof of ownership. The original file, however, can be copied and minted by other users without giving credit to the original artist, and this is where Adobe wants to take the lead in preventing the theft of original artwork.

Adobe Is Gearing Up to Address the Key Issues Faced by Artists

In 2019, Adobe co-founded the Content Authenticity Initiative by partnering with tech companies to combat visual misrepresentation by providing technology to validate the authenticity of digital content. This initiative was taken to help people determine whether a piece of media uploaded on a website was edited by an authorized member or by an unidentified third party.

The company will deploy the same technology for NFT artwork created using Adobe products. This feature, which is called Content Credentials, was launched on October 26 to cater to the growing demand for security features coming from NFT artists.

The tool is now in beta testing only for Photoshop users and is designed to determine the original creator of digital content. All Adobe Creative Cloud customers will have access to the Prepare as NFT option in the future as well, which will include a signature that certifies the new NFT pieces as unique.

To further strengthen the authenticity of digital art created using Adobe’s Creative Cloud suite, the company is partnering with NFT marketplaces such as Rarible, OpenSeas, KnownOrigin, and SuperRare as well. Adobe customers can use this tool to link their accounts to their social media or cryptocurrency wallets.

The NFT marketplaces will display a digital certificate of NFT creators’ verified credentials and Adobe’s online portfolio portal, Behance, will link to these verified credentials. As content is edited in the Creative Cloud software, this feature takes identity data and stores it as metadata allowing buyers of NFTs to view not only who minted NFTs, but also who created those.

The rollout of these features is likely to attract many new clients for Adobe, and the company is likely to enjoy first-mover advantages in this market. This might go a long way in helping the company report stellar earnings in the next few years as NFT art may become mainstream along with the rapid adoption of cryptocurrencies.

Wall Street’s Take

Turning to Wall Street, Adobe has a Strong Buy consensus rating, based on 19 Buys and three Holds assigned in the past three months. The average Adobe price target of $722.65 implies 12% upside potential.

Takeaway

The NFT market is booming, but many participants, including artists, have raised concerns regarding the possibility of fraudsters forging content.

Adobe, being the leading design software company in the world, is planning to address this issue by unveiling new tools to help digital artists create artwork that will preserve their authenticity.

Although the NFT art market is still in its early stages, Adobe’s entry is likely to boost the number of artists participating in this digital economy, which will benefit both this industry and Adobe’s earnings.

Disclosure: At the time of publication, Dilantha De Silva did not own any shares mentioned in this article.

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