Citi has adjusted its price target for Adobe (NASDAQ: NASDAQ:ADBE), bringing it down to $616 from the previous $621 while maintaining a neutral rating on the stock.
The revision follows Adobe's third-quarter earnings, which showed a robust performance aided by favorable large deal timing.
However, this was counterbalanced by a projection of weaker than usual fourth-quarter net new annual recurring revenue (NNARR) and a slight decrease in the full-year revenue forecast. The new outlook is partly attributed to a less effective annual recurring revenue (ARR) to revenue conversion, which may be influenced by increased customer churn.
The approximately 8% decline in Adobe's share price in after-hours trading is noted as significant, but it is thought to be a reaction to heightened investor expectations rather than a change in the fundamental analysis of the company.
The stock is reported to be trading higher than it was the day after the previous quarter's results were announced. The analyst believes that the current quarter's results do not alter the overall investment thesis, with growth in Creative Cloud NNARR, excluding price increases, remaining limited.
This is expected to continue fueling the debate over winners and losers in the context of generative artificial intelligence (GenAI).
Citi's forecasts for Adobe remain mostly unchanged despite the adjustments to the price target. The firm anticipates new product announcements at the upcoming Adobe MAX conference but does not expect significant financial updates at that event.
The initial guidance for fiscal year 2025 is likely to be conservative according to Citi, and their estimates are slightly below consensus expectations.
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