On Thursday, Mizuho (NYSE:MFG) adjusted its expectations for Adobe Inc. (NASDAQ:ADBE), currently trading at $549.93 with a market capitalization of $241.82 billion, setting a new price target of $620, down from the previous $640, while reaffirming an Outperform rating on the stock.
According to InvestingPro analysis, Adobe is currently trading slightly below its Fair Value. This change comes after Adobe reported fourth-quarter results, which included a net new Digital Media Annualized Recurring Revenue (ARR) of $578 million, exceeding management's guidance of $550 million. Although the figure surpassed the guidance, it was slightly below what investors had anticipated.
Adobe's total revenue for the quarter was $5.61 billion, which notably exceeded the Street's estimate of $5.37 billion. The company maintains impressive gross profit margins of 88.66% and has achieved revenue growth of 10.91% over the last twelve months.
The company has also provided a conservative forecast for the fiscal year 2025, projecting 11% growth in Digital Media ARR. However, the full-year revenue guidance was lower than expected, which contributed to the adjustment of the price target by Mizuho.
Despite the challenges faced throughout fiscal year 2024, Mizuho expressed confidence in Adobe's potential to capitalize on its Generative AI innovations. The firm anticipates that Adobe will see a healthy upside to its fiscal year 2025 ARR and revenue guidance as the year progresses.
The valuation of Adobe, based on the expected calendar year 2026 Free Cash Flow (FCF), remains attractive to Mizuho, currently standing at approximately 20 times the forecasted FCF. Adobe continues to be one of Mizuho's top stock picks for the next 12 months, even with the slight reduction in the price target. Discover more comprehensive insights and 14 additional ProTips about Adobe with InvestingPro, including detailed financial health scores and expert analysis in our exclusive Pro Research Report.
In other recent news, Adobe Inc. saw its stock rating downgraded from Buy to Hold by TD Cowen, which also cut the price target to $550 from the previous $625. Bernstein followed suit, adjusting its price target for Adobe to $587 from $644, while maintaining an Outperform rating.
KeyBanc reaffirmed its Underweight rating on Adobe with a price target of $450, expressing concerns about Adobe's 2025 guidance and a decline in Digital Media growth. However, Goldman Sachs maintained its Buy rating for Adobe, setting a price target of $640, emphasizing the company's consistent history of meeting or exceeding its guidance.
BofA Securities lowered its price target for Adobe from $640 to $605, but maintained a Buy rating, citing potential growth from improved upsell and cross-sell opportunities. Deutsche Bank (ETR:DBKGn) also revised its price target for Adobe to $600 from $650, upholding a Buy rating and highlighting expected growth in Adobe's Digital Media Annualized Recurring Revenue for fiscal year 2025.
These recent developments follow Adobe's fourth quarter earnings report, which showed revenue growth of 10.91% in the last twelve months and a shift in Adobe's strategy towards the adoption of artificial intelligence over immediate monetization efforts.
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