Adobe stock rises after Wells Fargo upgrades on AI initiatives
Shutthiphong Chandaeng
Adobe (NASDAQ:ADBE) was upgraded to Overweight from Equalweight at Wells Fargo Securities with a price target of $525 from $420.
Wells Fargo analysts said the AI debate continues to drive Adobe. Gen AI is a tailwind to Adobe as the firm expects much of the early value to accrue to established platforms and see potential for further break-out as products are monetized.
On Thursday, Adobe introduced a generative AI tool, Sensei GenAI across Adobe Experience Cloud applications for enterprises. The San Jose, Calif.-based company also introduced Firefly â a new offering aimed to help enterprises streamline and advance their content supply chain while optimizing costs.
The firm said that the competitive position improving after a tough year, it believes that the intensity of the competitive environment is moderating because â 1) Firefly presents a much required next act for Adobe plus natural extension of the company's entrenched position within digital media; 2) the current environment is a consolidators' market, as corporations aim to do more with less across IT.
The analysts think this is creating incremental opportunity for Adobe's DM and DX platforms at the expense of point solutions and emerging market-tech players.
The firm believes that Gen AI is more likely a catalyst for content growth. The analysts view Adobe well-positioned to benefit from early enterprise adoption as the company leans into its trusted status.
The firm thinks Firefly provides pricing power for DM and an underappreciated boost to DX given the expected explosion of content and views marketing/design as an ideal candidate for early Gen AI adoption.
In a growing bifurcated market, the analysts think Adobe's profile stands out favorably as profitability metrics provide valuation support, while the potential for an AI-enabled product cycle tailwind to surface presents opportunity for additional rebound or/and outperformance.
ADBE +3.80% to $455.71 premarket June 9
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