Adobe stock downgraded to Sell by Melius as AI threatens SaaS model

Investing.com - Melius Research downgraded Adobe (NASDAQ:ADBE) from Hold to Sell on Monday, setting a price target of $310.00 as the firm warns of ongoing multiple compression for software-as-a-service companies. The software giant, currently valued at $144.67 billion, has seen its shares decline significantly, now trading near its 52-week low of $332.01. InvestingPro data reveals the stock has dropped over 25% in the past six months.

The downgrade comes amid Melius’s assessment that "AI is eating software," a reversal of the previous "software eating the world" paradigm that benefited SaaS leaders. Adobe shares have already declined more than 20% year-to-date, along with peers Atlassian (NASDAQ:TEAM) and Salesforce (NYSE:CRM).

Melius draws parallels to how cloud computing previously decimated valuations of hardware companies like Dell (NYSE:DELL), HP (NYSE:HPQ), and IBM (NYSE:IBM) in the 2000s and 2010s, noting that SaaS investors "have never seen this kind of threat" since 2011.

The firm’s $310 price target represents approximately 13 times its fiscal year 2027 estimates for Adobe, reflecting reduced projections for 2026 and 2027.

Melius expects value to continue shifting from SaaS players like Adobe, Salesforce, and Workday (NASDAQ:WDAY) toward infrastructure providers such as Microsoft (NASDAQ:MSFT) and Oracle (NYSE:ORCL) as this trend progresses.

In other recent news, Adobe has been at the center of several significant developments. The company launched its Firefly mobile app for iOS and Android, expanding its AI-assisted content creation platform to smartphones. This new app allows users to generate and edit images and videos using text prompts, offering features like text-to-image and text-to-video conversion. In financial news, DA Davidson reiterated its Buy rating on Adobe, maintaining a price target of $500.00, citing optimism about Adobe’s digital content generation strategy. This was supported by a discussion with Adobe’s financial executives about the company’s competitive positioning and growth strategies. In contrast, Redburn-Atlantic downgraded Adobe from Neutral to Sell, lowering its price target to $280.00 due to concerns over AI disruption affecting Adobe’s competitive edge. Additionally, Citizens JMP maintained its Market Perform rating on Adobe following Canva’s announcement to acquire MagicBrief, an AI-powered ad platform. Lastly, DA Davidson highlighted Figma’s impressive financial performance, noting $821 million in revenue over the last twelve months, marking a 48% year-over-year growth.

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