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Investing.com - Bernstein lowered its price target on Adobe (NASDAQ:ADBE) to $508.00 from $530.00 on Friday, while maintaining an Outperform rating following the company’s quarterly results. The software giant, currently valued at $148.7 billion, is trading near its 52-week low, and according to InvestingPro analysis, appears undervalued at current levels.
Adobe delivered a solid quarter, slightly exceeding expectations across major metrics and raising its fiscal year guidance, partially aided by favorable foreign exchange rates. The company reached $250 million in annual recurring revenue (ARR) from new standalone AI products, including Firefly and Gen Studios, one quarter ahead of its target. The company maintains impressive gross profit margins of 89%, reflecting its operational efficiency. InvestingPro data reveals 12 additional key insights about Adobe’s financial strength.
Despite these positive developments, Bernstein noted the quarter did not definitively demonstrate that AI would drive accelerated growth or cause disruption in Adobe’s business. This likely explains why the stock showed only modest gains in after-hours trading despite the company beating estimates and raising guidance.
Bernstein believes 2026 could be a clarifying year for Adobe’s trajectory as AI-related ARR becomes substantial enough to noticeably impact revenue growth. The firm maintains that Adobe is well-positioned to deliver approximately 10% revenue growth in the near term with potential for acceleration driven by AI and go-to-market changes.
The investment firm expects Adobe to maintain stable to slightly improving margins and continue significant stock buybacks, factors that could drive mid-teens earnings per share growth, while noting the company’s current valuation suggests limited downside risk.
In other recent news, Adobe reported impressive fiscal third-quarter results, surpassing expectations in several key areas. The company achieved non-GAAP earnings per share of $5.31, beating the consensus estimate of $5.18. Adobe’s revenue, net new annual recurring revenue, and earnings per share all exceeded projections, as noted by Evercore ISI. Furthermore, Adobe reached its $250 million annual recurring revenue target for AI-first products a quarter ahead of schedule, according to KeyBanc. Despite these achievements, BofA Securities lowered its price target for Adobe to $460, citing the third quarter as a "turning point" with positive growth metrics. Evercore ISI also reduced its price target to $450 due to growth concerns but maintained an Outperform rating. Meanwhile, Goldman Sachs reiterated its Buy rating with a $570 price target, highlighting Adobe’s outperformance in Digital Media and Digital Experience revenues. Lastly, Citizens JMP maintained a Market Perform rating, acknowledging Adobe’s strong operating and gross margins. These developments reflect Adobe’s robust performance and ongoing strategic initiatives.
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