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BMO Capital reaffirmed its Outperform rating and $450.00 price target on Adobe (NASDAQ:ADBE) Friday. The technology giant, currently valued at $169.3 billion, demonstrated "reasonable" quarterly performance with stronger revenue results than net new Annual Recurring Revenue (ARR). The company maintains impressive gross margins of 89.25% and has achieved 10.63% revenue growth over the last twelve months.
Adobe raised its revenue guidance beyond both foreign exchange impacts and the quarterly beat, which BMO Capital found particularly notable given the current "tepid economic backdrop." The firm also observed that core Creative Cloud growth has been improving over the past several quarters. According to InvestingPro analysis, Adobe maintains strong financial health with impressive profitability metrics, with 10+ additional insights available to subscribers.
BMO Capital expects "limited upside" to Adobe’s full-year net new ARR guidance but considers the company’s current valuation "undemanding." The stock traded modestly lower in after-hours trading following the announcement.
The research firm maintained its $450 price target on Adobe shares despite the after-hours decline. BMO Capital’s analysis suggests the company is performing well on revenue metrics even as ARR growth remains constrained.
Adobe’s quarterly results reflect a mixed performance pattern with revenue outperforming ARR metrics, though the company demonstrated enough strength for BMO Capital to maintain its positive outlook on the stock.
In other recent news, Adobe has raised its full-year revenue guidance to $23.550 billion at the midpoint, with its Digital Media annual recurring revenue growth forecast remaining at 11%. The company reported second-quarter results that exceeded analyst expectations, with total revenue reaching $5.87 billion, surpassing consensus estimates of $5.80 billion. Adobe’s pricing changes for its Creative Cloud users in North America are expected to add approximately 3 percentage points to its growth, according to KeyBanc. Stifel highlighted Adobe’s AI annual recurring revenue, which is tracking ahead of its $250 million end-of-year target, as a positive signal of the company’s ability to drive adoption and monetization.
Mizuho maintained its Outperform rating on Adobe but lowered its price target to $530, noting the company’s meaningful monetization of generative AI innovations. Oppenheimer also lowered its price target to $500, citing group multiples compression, yet maintained an Outperform rating due to positive factors like AI-derived annual recurring revenue. Goldman Sachs (NYSE:GS) reiterated its Buy rating and $570 price target, emphasizing Adobe’s growth trajectory and the expansion of its enterprise market share. The firm’s AI adoption is accelerating, with significant increases in subscribers and expectations for AI-standalone products to surpass a $250 million run-rate by the fourth quarter of fiscal 2025.
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