Bitcoin price today: gains to $120k, near record high on U.S. regulatory cheer
Investing.com -- Melius Research downgraded Adobe (NASDAQ:ADBE) to Sell in a note Monday, warning that the shift toward artificial intelligence is triggering “a multiple contraction phase in early innings” for leading SaaS companies.
“The world is coming around to the reality that ‘AI is eating software,’” Melius wrote, noting that former darlings like Adobe, Atlassian (NASDAQ:TEAM), and Salesforce (NYSE:CRM) are each down more than 20% year-to-date.
The firm sees parallels to the early 2000s, when cloud computing “decimated” valuations for Dell (NYSE:DELL), HP (NYSE:HPQ), and IBM (NYSE:IBM).
“Just when you thought the coast was clear, their PE multiples kept going lower and lower—from the 20s to mid-single digits,” the analysts said.
The threat for SaaS, Melius warned, is that “almost anyone… can create an application so great that it can compete quickly and potently” thanks to AI, undermining the advantages of subscription-based models.
AI is “likely to kill seat growth” as companies consolidate roles in marketing, sales, creative, and HR departments.
On Adobe specifically, Melius cited “increased competition” from AI-first players like Figma, Canva, and Runway, as well as from large cloud providers such as Google (NASDAQ:GOOGL), which can “easily create image and video generation tools that literally blow you away.”
The firm expressed skepticism over Adobe’s ability to monetize AI tools like Firefly, warning that customers may resist paying more when “there are AI-first options from others.”
Melius cut its FY26 and FY27 estimates, now forecasting 7% revenue growth to $25.1B in 2026 and just 4% growth to $26.0B in 2027.
Its new $310 price target, based on ~13x FY27 EPS, reflects “odds on downward revisions over the next 4–8 quarters” as “pretty darn high.”
Bottom line, the analysts said: “It can get worse for SaaS players like Adobe… value [is] continuing to shift toward infrastructure winners like Microsoft (NASDAQ:MSFT) and Oracle (NYSE:ORCL).”