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KeyBanc Capital Markets reiterated its Sector Weight rating on Adobe (NASDAQ:ADBE) on Friday. The firm noted increasing optimism about Adobe’s recent Creative Cloud pricing changes and better-than-expected AI monetization based on its survey data. The software giant, with its impressive market capitalization of $176.31 billion, maintains strong profitability with an industry-leading gross margin of 89.25%.
Adobe raised its full-year revenue guidance from $23.425 billion to $23.550 billion at the midpoint, while maintaining its Digital Media annual recurring revenue growth forecast at 11.0%. The company indicated that previously announced pricing changes for North American Creative Cloud users were already factored into its guidance. According to InvestingPro analysis, Adobe’s current valuation suggests the stock is trading below its Fair Value, presenting a potential opportunity for investors.
KeyBanc observed that pricing increases have been substantial, ranging from 8-11% for individuals and teams, with potentially larger increases for Enterprise Term License Agreements (ETLAs). The firm estimates these pricing changes could add approximately 3 percentage points to Adobe’s growth.
The research firm expressed some concern that without these pricing increases, Creative Cloud’s underlying growth would likely be in the mid-to-high single digits range. KeyBanc had hoped to see more substantial growth driven by subscriber additions and ARPU expansion through AI adoption and monetization.
Despite seeing positive developments, KeyBanc maintained its neutral stance on Adobe stock, noting that while pricing power reflects Adobe’s strong market position, questions remain about core growth drivers beyond price increases. With a P/E ratio of 27.2 and revenue growth of 10.63% over the last twelve months, investors seeking deeper insights can access comprehensive analysis and 12 additional ProTips through InvestingPro’s detailed research report.
In other recent news, Adobe reported second-quarter results that exceeded analyst expectations, with total revenue reaching $5.87 billion, surpassing the consensus estimate of $5.80 billion. The company also achieved non-GAAP earnings per share of $5.06, exceeding the anticipated $4.96. Adobe’s Digital Media annual recurring revenue (ARR) grew 12% year-over-year, and the company raised its fiscal year 2025 revenue and earnings per share outlook slightly more than anticipated. Despite these positive results, several firms adjusted their price targets for Adobe. Stifel lowered its target to $480 while maintaining a Buy rating, citing concerns about growth rates in certain segments. Mizuho (NYSE:MFG) reduced its target to $530, maintaining an Outperform rating, and expressed confidence in Adobe’s fiscal year 2025 guidance. Oppenheimer decreased its target to $500, also maintaining an Outperform rating, due to "group multiples compression." Meanwhile, Goldman Sachs reiterated its Buy rating with a $570 target, highlighting Adobe’s AI growth potential. JMP Securities maintained a Market Perform rating, noting Adobe’s strong performance in the Digital Media and Digital Experience segments.
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