Proactive Investors - Adobe Inc (NASDAQ:ADBE) has a history of providing conservative guidance for the new fiscal year, analysts at Jefferies highlighted after the creative software provider’s 2024 outlook disappointed investors earlier this week.
“Expectations were high going in [to earnings] with the stock up 85% year to date and generative AI momentum building, combined with new 6% to 10% price increases,” the analysts noted.
They noted that the midpoint of the company’s guidance was below the consensus expectation by 1% to 3%, except for digital media annual recurring revenue, which was 6% lower than expected.
Adobe guided $1.9 billion compared to the Street estimate of $2.02 billion, which was poorly received by investors who sent Adobe stock 5% lower.
“But Adobe has a history of conservative annual recurring revenue guide, with final beating initial guide by greater than $200 million in two out of the last three financial years and in pre-Covid 2019 financial year,” the analysts wrote in a note to clients.
“Fiscal 2024 is well-positioned to repeat and could exceed $2.1 billion thanks to many drivers tied to Firefly generative artificial intelligence (gen AI) adoption (price increases, rollout to more products and geographies, enterprise ramp).”
The analysts reiterated their ‘Buy’ rating on Adobe and increased their price target on the stock from US$600 to US$700.
Adobe shares traded hands at about US$586 on Friday morning.
“We see Adobe as a top two winner along with Microsoft (NASDAQ:MSFT) in monetizing gen AI in 2024,” they wrote.
“We see many drivers benefiting fiscal 2024 and extending into fiscal 2025, including Creative Cloud price increases, launch of Express mobile app, launch of gen AI for DC, and ramping adoption of Firefly in enterprises.”