UBS analysts have increased their 12-month target price on shares of Adobe Inc from $370 to $440, saying that after speaking with customers and other checks to gauge the artificial intelligence (AI) impact they conclude that the company’s Firefly AI art generator is likely to end up as a net positive for the software provider.
“In our view much of (the stock’s) out-performance (Adobe shares are up 24% over the last two weeks) has been driven by a reversal of AI concerns (from an “AI loser” to AI being neutral if not a tailwind for Adobe),” the analysts wrote.
“We share this view and think investors are also focused on two other key topics, namely Figma regulatory overhang and a tougher spending backdrop and the risk that Adobe misses its guidance for 13% revenue growth (on a constant currency basis) in Fiscal Year 2023,” they added.
Last September, Adobe announced a definitive merger agreement to acquire Figma for approximately $20 billion in stock and cash. The deal would involve Figma's creators joining Adobe, but regulatory approval was expected in 2023. However, the European Commission intends to evaluate the acquisition due to concerns that it could have a significant impact on competition in the market for interactive product design and whiteboarding software.
Analysts at UBS noted they remain Neutral-rated on Adobe stock but conclude that the risk-reward is modestly positive at 21 times their Fiscal Year 2024 free cash flow estimate.
Shares of Adobe rose 1.2% to $420.36 in late afternoon trading on Tuesday, but have gained about 25% year to date.
Contact Sean at sean@proactiveinvestors.com