Adobe price target lowered to $530 from $575 at Mizuho

Mizuho (NYSE:MFG) maintained its Outperform rating on Adobe (NASDAQ:ADBE) stock while lowering its price target to $530 from $575 on Friday. Currently trading at $413.68, Adobe remains below analyst targets ranging from $380 to $630, with InvestingPro analysis suggesting the stock is currently undervalued.

The software company reported second-quarter results that exceeded analyst expectations, with Digital Media annual recurring revenue (ARR) growing 12% year-over-year on a constant currency basis. Total (EPA:TTEF) revenue reached $5.87 billion, surpassing consensus estimates of $5.80 billion. The company maintains impressive gross profit margins of 89.25% and has generated $9.2 billion in levered free cash flow over the last twelve months.

Adobe reiterated its fiscal year 2025 ARR guidance and raised its revenue and earnings per share outlook slightly more than anticipated, according to Mizuho.

The research firm noted that Adobe has begun "meaningfully monetizing" its generative AI innovations and expects an upcoming price increase to positively impact results over time. Mizuho also expressed confidence that the company’s fiscal year 2025 ARR and revenue guidance appears achievable despite increased macroeconomic uncertainty.

Mizuho cited Adobe’s valuation of 16-17 times estimated calendar year 2026 free cash flow as "quite attractive" while adjusting its price target based on updated discounted cash flow analysis.

In other recent news, Adobe reported fiscal second-quarter results that exceeded analyst expectations, with non-GAAP earnings per share of $5.06 and revenue of $5.87 billion, surpassing consensus estimates of $4.96 and $5.79 billion, respectively. The company achieved 11% year-over-year revenue growth, driven by its Digital Media and Digital Experience segments. Analysts have responded with mixed reactions; DA Davidson raised Adobe’s price target to $500, citing increased pipeline visibility and strong AI contributions, while Stifel lowered its target to $480, expressing concerns over Digital Media ARR outlook despite positive developments in Adobe’s Business Pro + Consumer segment.

Oppenheimer also adjusted its target to $500, maintaining an Outperform rating, and highlighted Adobe’s AI-derived annual recurring revenue as a positive factor. Meanwhile, Goldman Sachs reiterated a Buy rating with a $570 price target, pointing to Adobe’s expanding market share and potential revenue growth from AI-enhanced tools. JMP Securities maintained a Market Perform rating, noting Adobe’s better-than-expected net new Digital Media annual recurring revenue of $460 million. Adobe’s ongoing AI advancements, such as its Firefly App, are seen by analysts as a promising area for future growth, with expectations of reaching a $250 million run-rate by the fourth quarter of fiscal 2025.

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