Why Analysts Can't Quit Adobe Even After Disappointing Revenue Guidance

• Adobe stock tumbled Thursday after the company issued a fiscal 2025 revenue outlook below analysts' expectations.

• Analysts lowered their Adobe price targets but maintained "buy" ratings on optimism for the company's generative AI monetization.

• Adobe said it plans to introduce a higher-priced version of its generative AI toolset, Firefly.

Adobe (ADBE) shares dropped Thursday after the company’s results the day before came with an underwhelming revenue outlook, but analysts still have largely bullish, if tempered, expectations for artificial intelligence (AI) monetization by the company.

The Creative Cloud company “has been a frustrating stock for much of FY24,” Mizuho Americas analysts said in a note Thursday. The firm maintained its “outperform” rating but lowered its price target to $620 from $640. Adobe stock fell more than 13% shortly after the opening bell, and recently traded at $480.37, off 12.6%. The stock has dropped nearly 20% in 2024.

Despite the lower price target, the Mizuho analysts "remain confident ADBE will significantly monetize its Generative AI innovations going forward,” they wrote.

Adobe Digital Media President David Wadhwani said the company plans to introduce a more expensive version of its Firefly generative AI toolset, according to an earnings call transcript provided by AlphaSense. The offering is meant to "monetize new users" and increase average revenue per user, Wadhwani said.

Bank of America (BofA) analysts on Thursday lowered their Adobe price target to $605 from $640 but similarly maintained their “buy” rating.

The BofA analysts described the most recent quarter as ending "a year of delayed gratification for AI," although they said they've seen "some encouraging leading indicators for reacceleration as we head into next year."

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