Adobe (NASDAQ:ADBE) shares rose 2.5% in premarket Monday trading after Morgan Stanley analysts upgraded the rating to Overweight from Equal Weight.
The analysts also lifted the price target on ADBE stock by $150 to $660 per share, which is a new Street-high price target. The new price target implies an upside potential of about 27%.
“While late to the party, a clear catalyst path for estimates to move higher at Adobe on the back of conservative guidance for Digital Media Net New ARR (NNARR) in the near-term and a framework to size upside from Generative AI in the medium/long-term gets us back on board with an Overweight on ADBE,” the analysts said in an upgrade note.
Adobe is described as “one of the strongest franchises in software,” paving the way for its Creative Cloud to capitalize on the integration of Generative AI functionality into existing workflows.
“Our framework assumes 1) integration of GenAI capabilities supports a 30% productivity improvement, or $1,500 monthly savings against the average Creative Professional salary.”
Adobe stock is up 57% year-to-date.