Adobe price target lowered to $470 from $490 at TD Cowen on AI outlook

TD Cowen lowered its price target on Adobe (NASDAQ:ADBE) stock to $470 from $490 on Monday, while maintaining a Hold rating on the software company’s shares. Adobe, a prominent player in the software industry with impressive gross profit margins of 89.25%, has maintained strong profitability with over $22.6 billion in revenue over the last twelve months.

The research firm cited Adobe’s first-quarter revenues of $5.87 billion, which grew 11% on a constant currency basis, slightly exceeding TD Cowen’s estimates. Digital Media net new annual recurring revenue (NNARR) reached approximately $460 million, marginally below the firm’s $463 million projection, and continued to show negative mid-single-digit growth. According to InvestingPro analysis, Adobe appears undervalued compared to its Fair Value, with analysts setting price targets ranging from $380 to $630.

Adobe slightly raised its fiscal year 2025 guidance following the second-quarter beat and favorable foreign exchange conditions. The company reported its artificial intelligence book of business is tracking ahead of its fiscal year 2025 target of approximately $250 million in annual recurring revenue.

TD Cowen noted Adobe’s upcoming Creative Cloud Pro pricing plan, scheduled to launch June 17 in North America, is expected to add new pricing tailwinds in the second half of the year. Despite these positive developments, the research firm indicated Adobe shares would likely remain range-bound.

The price target reduction to $470, representing approximately 20 times enterprise value to calendar year 2026 estimated free cash flow, was attributed to pressure in sector valuations, while growth estimates on a constant currency basis and operating margin estimates remained largely unchanged. InvestingPro data shows Adobe maintains a GOOD financial health score, with strong cash flows and moderate debt levels. Subscribers can access 10+ additional ProTips and comprehensive valuation metrics in Adobe’s Pro Research Report.

In other recent news, Adobe has reported earnings that slightly exceeded estimates, prompting UBS to maintain its Neutral rating with a $430 price target. The company has modestly increased its fiscal year 2025 revenue and EPS targets, while reaffirming its annual recurring revenue (ARR) growth target at 11%. RBC Capital reiterated its Outperform rating with a $480 price target, highlighting Adobe’s solid performance and strategic roadmap progress, though it noted competition in the generative AI space. BMO Capital also maintained its Outperform rating, citing stronger revenue growth and a $450 price target, despite limited upside to ARR guidance. KeyBanc Capital Markets kept its Sector Weight rating, noting optimism about Adobe’s Creative Cloud pricing changes and AI monetization, which could add to growth. Stifel lowered its price target to $480 from $525 but maintained a Buy rating, recognizing positive developments in AI revenue and market positioning. Adobe’s recent Creative Cloud pricing changes have been substantial, with increases of 8-11% for individuals and teams. Analysts have expressed mixed views on Adobe’s growth prospects, with some concerns about core growth drivers beyond price increases.

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