Adobe price target slashed at Citi going into Q1 on rising competition, limited upside
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Adobe (NASDAQ:ADBE) is set to report first-quarter results next week, but investment bank Citi cut its price target going into the print, noting the tech software company has several concerns that it has not had in the past.
Analyst Tyler Radke maintained his neutral rating, but lowered the price target to $455, down from $611, noting Adobe (ADBE) is like to see "lower-than-typical upside" to its key Net New annual recurring revenue metric, or nnARR, due to rising competition at the low end of the market. It may also see slower digital marketing spending, which could limit revenue.
"While we saw solid overall bookings performance from [Salesforce], we did observe some signs of slower growth in the Marketing Cloud where growth decelerated to ~20% from ~25% [year-over-year]," Radke wrote in a note to clients.
Adobe (ADBE) shares rose slightly less than 0.5% to $446.26 in mid-day trading on Friday.
In addition, Radke noted these factors could negatively impact Adobe's (ADBE) digital experience, which could have slower growth and also see a slower pace of operating margin expansion.
Adobe (ADBE) is also likely to see seasonal headwinds in the first-quarter, "given a more normalized demand environment and extended holiday season."
Concerning its key Net New annual recurring revenue metric, Radke sees only 2% or 3% upside, which has been below "typical levels" in the past, with Digital Media nnARR at roughly $423 million, which would be a decline of 3% year-over-year. 
For digital experience, revenue growth is likely to slow to 12% year-over-year, down from 23% in the fourth-quarter, as the period is facing tough comparisons, including an extra week and reduced transactional benefits. 
Adobe (ADBE) was mentioned by Wedbush Securities as one of the stocks that could be bought after the Federal Reserve gave a "bright green light" to investors following its interest rate hike on Wednesday.