2. Adobe Inc (NASDAQ:ADBE)
Number of Hedge Funds Investors: 123
Jim Cramer in a program on CNBC said the following about Adobe Inc (NASDAQ:ADBE) ahead of its earnings:
“Adobe reports, it’s got to break the spell of undeserved negativity surrounding its stock. I bet CEO Shantanu Narayen will deliver something that makes the stock worth owning into the print.”
Adobe beat estimates for its latest quarter but the stock fell amid AI growth-related concerns. However, Wall Street sees hope for the stock.
“ADBE has been a frustrating stock for much of FY24,” stated Mizuho analyst Gregg Moskowitz. “Having said that, today’s disclosures indicate that ADBE is beginning to meaningfully monetize its Generative AI innovations, and we continue to expect solid upside to the FY25 ARR/revenue guidance as the year unfolds.” Mizuho adjusted its price target for the stock to $575, down from $620. “While we lower our PT to $575 due to comp multiple compression and a quarter that was a bit less clean than hoped, we reiterate our Outperform rating, and ADBE remains one of our top picks over the next 12 months,” he added.
KeyBanc Capital Markets maintained its Underweight rating and decreased its price target to $390 from $450. “Adobe provided the AI ARR from just four standalone products of $125M, which it looks to double by the end of the fiscal year,” said KeyBanc analyst Jackson Ader, in an investor note. “It’s important to note that the Company is still generating revenue from what we’d consider AI-related activity. No, it’s not a huge number, but at least the Company isn’t padding its AI stats.”
RiverPark Large Growth Fund stated the following regarding Adobe Inc. (NASDAQ:ADBE) in its Q4 2024 investor letter:
“Adobe Inc. (NASDAQ:ADBE): ADBE was a top detractor in the quarter after giving disappointing FY2025 guidance despite reporting strong FY4Q24 earnings. Better revenue growth (+11% versus expectations of +10%), operating margins (47% versus expectations of 46%), and Digital Media Net New Annual Recurring Revenue (“DM NNARR,” a key metric,$578 million versus expectations of $555 million) were driven by both new customers and expansion of existing relationships. Despite these strong numbers, the company guided the current year DM NNARR to $1.9 billion, below expectations of $2.0 billion, leading some investors to speculate on the maturity of Adobe’s business and its competitiveness against emerging AI solutions.
Some investors believe that AI, and Open AI’s Sora product specifically, pose an existential threat to Adobe’s Creative Cloud Suite. We do not share these concerns and believe that AI is a tremendous growth opportunity for Adobe, a view shared by ADBE management. ADBE is the leading software and solutions provider in the content creation and content management space. The company offers a line of products and services used by creative professionals, communicators, businesses of all sizes, and consumers for creating, managing, delivering, measuring and optimizing content and experiences across personal computers, smartphones, other electronic devices and digital media formats. The company has grown revenues in the double-digit percent range for the last decade, and as it enters its 43rd year since its founding, we expect ADBE to continue to grow revenue greater than 10% per year through 2028. The company generates 41% EBITDA margins, which we think can expand to nearly 50%, and we believe the company will more than double last year’s roughly $7.9 billion of free cash flow over the next five years.”
