Adobe Inc (NASDAQ:ADBE) remains a ‘Buy’-rated stock according to analysts at Jefferies, who cited the company’s strong product relevance, continued innovation, and compelling valuation.
Despite recent underperformance, the analysts noted that Adobe’s fundamentals and long-term outlook remain intact.
A key pillar of the positive outlook is Adobe’s pricing strategy. Analysts expect the company's approximately 7% Creative Cloud price hike, effective June 17, to provide near-term support and medium-term upside.
This follows the November 2023 price increase, which created a difficult year-over-year comparison but also sets the stage for pricing tailwinds.
“The recently announced price increases for Creative Cloud renewals starting June 17th should help neutralize the headwind of lapping November 2023 price increases in the second half of 2025,” they wrote.
Another tailwind is foreign exchange, with the analysts expecting approximately 1 percentage point of benefit compared to guidance of a 1 percentage point headwind.
Checks by the analysts also support Adobe’s ongoing importance in the creative software space amid rising competition, Jefferies added.
Notably, its investment in innovation should support execution, with research and development spend increasing to 14.5% of fiscal year 2025 sales compared to 12.6% in 2021.
“Adobe remains highly relevant in the creative technology space, supported by established enterprise ties, strong distribution network, and integrated tools,” they wrote.
“That said, Canva, Figma, and new AI tools are gaining traction among non-creative professionals, prompting more offense from Adobe to retain mindshare.”
Jefferies awarded Adobe a price target of $590, representing upside of about 42% at the time of writing.
This price target reflects expectations of growth deceleration to a single-digit and margin compression from its current approximately 45% level.
“If Adobe can sustain low double-digit growth and margins, we see valuation support and potential for a material multiple rerating, driven by results showing improving top-of-funnel and AI monetization,” they wrote.