RBC Capital maintains outperform rating on Adobe stock

On Thursday, RBC Capital analysts reaffirmed their Outperform rating on Adobe stock (NASDAQ: NASDAQ:ADBE), maintaining a price target of $480. The analysts anticipate strong second-quarter results, which Adobe is scheduled to report on June 12 after market close. The software giant, with a market capitalization of $177 billion, has maintained impressive gross margins of 89% and achieved 10.5% revenue growth over the past twelve months.

The analysts noted that Adobe’s stock has underperformed compared to its large-cap peers. Trading at $416.94, InvestingPro analysis suggests the stock is currently undervalued, with a PEG ratio of 0.59 indicating attractive pricing relative to growth. The focus remains on the relationship between generative artificial intelligence (GenAI) and competition.

RBC Capital highlighted the potential for increased visibility around GenAI monetization. This could be achieved through the combination of generative credits from video and tiered pricing, which may play a crucial role in improving investor sentiment.

The reiterated Outperform rating and price target reflect RBC Capital’s confidence in Adobe’s potential to capitalize on these opportunities.

In other recent news, Adobe announced a price increase for its Creative Cloud offerings, which is expected to enhance its Annual Recurring Revenue by approximately 2%. Despite this adjustment, KeyBanc Capital Markets maintained its Sector Weight rating, indicating no significant change in Adobe’s market position. Jefferies also reaffirmed a Buy rating with a $590 price target, highlighting the price increase and Adobe’s ventures into artificial intelligence as positive factors for future financial performance. Additionally, DA Davidson maintained its Buy rating with a $450 price target, emphasizing Adobe’s undervaluation in the market and its strong position in the creative ecosystem.

In another development, Adobe appointed Louise Pentland as the new Chief Legal Officer and Executive Vice President. Pentland, who previously held senior legal roles at Roku (NASDAQ:ROKU) and PayPal (NASDAQ:PYPL), will oversee Adobe’s global legal and policy matters. Her appointment is seen as a strategic move as Adobe continues to focus on personalized digital experiences. Meanwhile, several tech companies, including Adobe, faced scrutiny following a report that the Trump administration is seeking to reduce federal contract spending. The General Services Administration has issued letters to companies like Dell (NYSE:DELL) and CDW (NASDAQ:CDW), asking for justifications for their federal contracts. This initiative is part of a broader strategy to streamline federal purchasing and reduce costs.

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