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On Thursday, BofA Securities adjusted its stance on Adobe (NASDAQ:ADBE), reducing the price target to $528 from the previous $605, while still recommending the stock as a Buy. The revision reflects a recalibration of valuation multiples in the software sector, according to BofA Securities analyst Brad Sills. According to InvestingPro data, Adobe currently trades at a P/E ratio of 35.5x and maintains impressive gross profit margins of 89%, though the stock is currently trading below its Fair Value estimate.
Sills highlighted that Adobe’s first-quarter results and future outlook presented a steady course for the company’s creative and digital experience segments. With revenue growth of 10.8% in the last twelve months and a market capitalization of $190.75 billion, Adobe continues to demonstrate strong market presence. A notable point in the analysis was the increasing adoption metrics and the first-time disclosure of revenue from Adobe’s artificial intelligence platform, Firefly, which indicates a trajectory towards improved monetization of the product. For deeper insights into Adobe’s AI initiatives and financial performance, InvestingPro subscribers can access comprehensive analysis and 14 additional key insights about the company.
BofA Securities’ recent Cloud Views report supports the optimistic view on Firefly, revealing a surge in monthly active users (MAU) to 6 million in February, up from 4.5 million in January. This uptick in usage underpins the firm’s continued Buy rating on Adobe shares.
The new price objective is based on a 23 times calendar year 2026 estimated free cash flow (FCF), a decrease from the prior multiple of 25 times. The adjustment also takes into account an alignment with large-cap peers, considering a 1.6 times growth rate adjusted for a 14% two-year compound annual growth rate (CAGR). BofA Securities has revised its estimates for Adobe in line with the company’s provided guidance, which has informed the updated price target.
In other recent news, Adobe Systems Incorporated announced its financial results for the first quarter of fiscal year 2025, surpassing analysts’ expectations. The company reported a non-GAAP earnings per share (EPS) of $5.08, exceeding the forecasted $4.97, and posted revenue of $5.71 billion, surpassing the projected $5.66 billion. Adobe’s Digital Media and Digital Experience segments contributed significantly to this growth, with revenues of $4.23 billion and $1.41 billion, respectively. Despite the strong earnings, Adobe’s stock fell in after-hours trading. The company reaffirmed its FY2025 targets, emphasizing AI-driven growth and strategic initiatives like expanding subscription tiers. Adobe introduced new AI-driven products, including a Firefly video model, which aims to enhance its product offerings. Analysts have noted the company’s focus on AI as a transformative opportunity for its technology platforms.
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