Street Calls of the Week
Investing.com - Oppenheimer maintained its Outperform rating and $460.00 price target on Adobe (NASDAQ:ADBE) following the company’s fiscal third-quarter results. According to InvestingPro analysis, Adobe currently appears undervalued, with the stock trading at $350.55, showing strong financial health metrics and maintaining impressive gross profit margins of 89%.
Adobe reported better-than-expected third-quarter performance and raised its fiscal year 2025 guidance slightly above the third-quarter upside. The company’s artificial intelligence initiatives showed significant progress, with AI-derived annual recurring revenue (ARR) doubling over the past six months. The company’s robust performance is reflected in its 10.7% revenue growth over the last twelve months, with InvestingPro data showing strong profitability metrics.
The magnitude of Adobe’s earnings beat increased in the third quarter, with top-line outperformance contributing to the highest operating margin in fiscal year 2025. Management’s guidance adjustments reflect confidence in continued momentum through the remainder of the fiscal year.
Despite these positive developments, Adobe’s net-new Digital Media ARR and fourth-quarter revenue guidance show only single-digit growth. These metrics could potentially support bearish arguments that Adobe’s growth might fall below 10% in the next fiscal year.
Oppenheimer noted that while these concerns exist, Adobe’s estimates are rising and its AI business is outperforming expectations for the current fiscal year, supporting the firm’s maintained Outperform rating.
In other recent news, Adobe delivered a strong quarterly performance, exceeding expectations in revenue, net new annual recurring revenue (NNARR), and earnings per share. The company notably achieved its $250 million ARR target for AI-first products, such as Firefly and Gen Studios, a quarter earlier than planned. Analysts have responded to these developments with varied adjustments to Adobe’s stock price targets. RBC Capital reiterated an Outperform rating, highlighting the company’s progress in artificial intelligence, while maintaining a price target of $430. Bernstein also maintained an Outperform rating but lowered its price target to $508 due to moderate AI impact considerations. BofA Securities sees Adobe’s third quarter as a turning point, adjusting their price target to $460 while keeping a Buy rating. Evercore ISI reduced its price target to $450, citing growth concerns, but maintained an Outperform rating. KeyBanc kept a Sector Weight rating, noting the early achievement of Adobe’s AI revenue goals.
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