On Thursday, Piper Sandler reaffirmed its confidence in Adobe (NASDAQ:ADBE) stock, maintaining an Overweight rating and a price target of $635.00. The firm focused on Adobe's status as a high-quality large-cap software company, with potential to shift from a "laggard to leader" in the coming year.
Despite a 10% year-to-date decline in Adobe's shares, compared to the S&P 500's 28% gain, Piper Sandler highlighted Adobe's robust subscription growth trends and improving committed remaining performance obligations (cRPO) growth metrics as reasons for optimism.
Adobe's subscription growth has been consistent, with an average of 11.8% over the past nine quarters. Recent data from InvestingPro shows revenue growth of 10.91% over the last twelve months, with the company maintaining strong financial health metrics. This trend, coupled with an anticipated high operating margin of approximately 46%, suggests a strong financial outlook for the company.
Piper Sandler suggests that Adobe's earnings report, scheduled for December 11, could further reinforce the sustainability of its subscription growth.
The firm anticipates that Adobe could experience earnings per share (EPS) compounding at a rate of over 13% annually, potentially reaching over $30 by the calendar year 2028. This growth expectation is based on the potential for new product momentum to drive both earnings and multiple expansion in the following year.
Piper Sandler's reiteration of its Overweight rating on Adobe is based on the belief that despite current mixed investor sentiment, the company is well-positioned for future growth. The firm sees Adobe's recent product developments as a driving force for positive change in both its earnings and market valuation in the near future.
In other recent news, Adobe Inc. has been in the spotlight due to a series of analyst ratings and product developments. DA Davidson and Morgan Stanley (NYSE:MS) maintained their positive outlook on the company with Buy and Overweight ratings respectively, based on Adobe's potential to enhance its margin profile and capitalize on Generative AI.
However, Baird and Citi kept their Neutral ratings, expressing concerns about the company's top-line growth and the need for better visibility into future performance.
Adobe recently showcased its innovative AI capabilities and product enhancements at its annual MAX conference, with the unveiling of the Firefly Video Model and significant updates to flagship products like Photoshop and Illustrator.
These developments, coupled with a global AI literacy initiative aiming to train 30 million learners worldwide by 2030, underscore Adobe's commitment to innovation and its strategy to maintain a competitive edge in the market.
TD (TSX:TD) Cowen reiterated its Buy rating, highlighting Adobe's AI developments as potential growth drivers. BMO (TSX:BMO) Capital Markets also sustained an Outperform rating, citing long-term growth potential from Adobe's new product launches.
However, Adobe's focus on AI and cloud-based collaboration, as well as its commitment to innovation, continue to be central to its growth strategy. These recent developments provide a snapshot of Adobe's ongoing efforts to innovate and expand in the digital content creation market.
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