TD Cowen's analyst J. Derrick Wood announced today, on December 12, 2024, that he downgraded Adobe from Buy to Hold for some reasons:

Growth Risks:

The new Annualized Recurring Revenue (ARR) in the last quarter of FY24 of Adobe is $ 578 million giving a 2% of growth rate. However, it is below the growth rate of the third quarter in the same fiscal year. Adobe's go-to-market (GTM) strategies are less effective to its customers leading to lower customer acquisition and retention.

Guidance:

Adobe projected the fiscal year 2025 growth to be about 8-10% below the 11% consensus estimate. They also estimated for 50 basis points Operating margin contraction while analysts had expected Adobe's nextOperating margin to be just stagnant.

Ineffective AI Monetization:

Wood also noted that its AI monetization was considered to be low relatively to total revenues of Adobe, suggesting Adobe's ineffective efforts in monetizing its AI technologies embedded to its products.

For the reasons, TD Cowen reduce the price target for Adobe from $625 to $550 per share.

However, on the one-year price targets offered by 33 analysts, the average target price for Adobe Inc is $619.63 with a high estimate of $732.52 and a low estimate of $440.00.

The average target implies a upside of +28.44% from the current price of $482.44. Based on GuruFocus estimates, the estimated GF Value for Adobe Inc in one year is $654.09, suggesting a upside of +35.58% from the current price of $482.44.

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This article first appeared on GuruFocus.