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Investing.com - Evercore ISI has reduced its price target on Adobe (NASDAQ:ADBE) to $450 from $475 while maintaining an Outperform rating following the company’s fiscal third-quarter results. The software giant, currently valued at $148.7 billion, is trading near its 52-week low at $350.55. According to InvestingPro analysis, Adobe appears undervalued compared to its Fair Value.
Adobe delivered solid fiscal third-quarter performance with revenue, net new annual recurring revenue (NNARR), and earnings per share all exceeding expectations, according to Evercore ISI. The company, maintaining impressive gross profit margins of 89.25% and achieving 10.63% revenue growth over the last twelve months, reported significant progress on initiatives including the launch of Acrobat Studio with PDF Spaces and AI Assistant, accelerating adoption of Creative Cloud Pro and Firefly app, and expanding GenStudio for Performance Marketing. InvestingPro subscribers can access 12 additional key insights about Adobe’s financial health and growth prospects.
The firm noted that Adobe’s direct AI annual recurring revenue topped its fiscal year guidance of $250 million a quarter early, which it considered positive. However, Evercore ISI pointed out that Adobe’s fourth-quarter guidance, while slightly ahead of consensus, still implies revenue and NNARR deceleration.
The implied fourth-quarter guidance for NNARR would appear to leave room for NNARR to grow year-over-year for the first time this fiscal year, but Evercore ISI believes that until revenue and NNARR growth stabilizes, the debate regarding Adobe’s terminal growth will likely continue.
At approximately 13.5 times calendar year 2027 earnings per share, Evercore ISI believes the market is already incorporating significant skepticism toward Adobe’s long-term growth, creating a positive risk/reward profile, though it acknowledges a sentiment shift is unlikely until revenue stabilizes or the company provides new metrics addressing perceived terminal risk related to competition and AI alternatives.
In other recent news, Adobe reported strong financial results for its fiscal third quarter of 2025, surpassing analyst expectations. The company achieved a non-GAAP earnings per share of $5.31, exceeding the consensus estimate of $5.18, and reported revenue of $5.99 billion, which was above the anticipated $5.91 billion. Adobe also reached its $250 million annual recurring revenue target for AI-first products a quarter earlier than planned. Following these results, Goldman Sachs reiterated its Buy rating on Adobe, highlighting the company’s outperformance in Digital Media and Digital Experience revenues, as well as its improved operating and free cash flow margins. KeyBanc maintained its Sector Weight rating, while Citizens JMP reiterated a Market Perform rating, reflecting confidence in Adobe’s recent performance. These developments underscore Adobe’s strong earnings and revenue achievements, as well as its advancements in AI integration.
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