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Adobe (ADBE) Gains 17.7% in 3 Months: What Should You Do Now?
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Adobe’s (ADBE - Free Report) investors have been enjoying some short-term gains from the stock of late. Its shares have rallied 17.7% in the past three months, outperforming the Zacks Computer-Software industry’s return of 6.8% and the S&P 500’s 10.4% growth.
The company is significantly benefiting from its strong generative AI capabilities. Its expanding AI-powered product portfolio has been a key catalyst in driving its top-line growth. The solid momentum of its family of creative, generative AI models, Firefly, which has been driving growth within the Digital Media and Digital Experience segments, is a major positive.
Adobe’s leading market position in the PDF category is a plus.
ADBE is trading at a significant discount, with a forward 12-month P/E of 24.04X compared with the industry’s 31.85X, making it a good opportunity for investors.
In second-quarter fiscal 2024, the Digital Media segment, comprising Creative Cloud and Document Cloud, witnessed 11% year-over-year growth, mainly driven by the strong adoption of Firefly-powered tools and the Acrobat ecosystem.
The Digital Experience segment, comprising Adobe Experience Cloud, witnessed 9% year-over-year growth on the back of Adobe Experience Platform (“AEP”) powered by generative AI.
ADBE's Three Months Price Performance
Image Source: Zacks Investment Research
For fiscal 2024, Adobe expects Digital Media revenues between $15.80 billion and $15.85 billion. The Digital Experience segment’s revenues are expected between $5.325 billion and $5.375 billion.
Expanding Gen AI-Powered Solutions Aid Prospects
Per a Grand View Research report, the generative AI market size is expected to witness a CAGR of 36.5% between 2024 and 2030. Adobe is well-poised to capitalize on this growth prospect on the back of its strengthening generative AI-powered portfolio of solutions.
Adobe’s unveiling of the Firefly Image 2 Model, Firefly Vector Model and Firefly Design Model to mark a significant advancement in its creative generative AI model family, enhancing creative control, image quality and illustrator capabilities, is a major positive.
The company recently added features to Acrobat AI Assistant to allow customers to ask questions, get insights, and create content from information across groups of PDFs and other document types, including Microsoft Word, Microsoft PowerPoint and text files. It also introduced enhanced meeting transcript capabilities in AI Assistant.
Adobe also offers AEP AI Assistant, which is capable of answering technical questions, automating tasks, simulating outcomes and generating audiences seamlessly.
The launch of Generative Remove in Adobe Lightroom, which is a powerful Firefly-backed tool that helps remove unwanted objects from any photo in a single click in a non-destructive manner, is noteworthy.
The introduction of Adobe Express for Enterprise, which is powered by Firefly Image Model 3, is driving the company’s momentum among various enterprises.
The company recently made Adobe Content Hub with Adobe Experience Manager (“AEM”) Assets generally available. This will enable various brands to manage several creative assets seamlessly with the power of generative AI-backed Content Hub.
In this booming generative AI era, Adobe faces strong competitive pressure from tech giants like Alphabet’s (GOOGL - Free Report) Google, Amazon, Microsoft (MSFT - Free Report) and Meta Platforms, which are continuously making advances to bolster their generative AI capabilities and Large Language Models.
Strong Customer & Partner Bases Drive Growth
A solid portfolio and differentiated approach to AI are attracting an expanding universe of customers across Adobe’s segments.
International Business Machines (IBM - Free Report) is one of the notable customers leveraging Adobe Firefly. IBM was able to generate 200 campaign assets and more than 1,000 marketing variations in moments rather than months using Firefly models.
Adobe’s other key customer wins include Samsung, Comcast, Mercedes-Benz, ULTA Beauty, Maruti Suzuki, ServiceNow, AECOM, AstraZeneca, Chevron, Wells Fargo, Novo Nordisk, Berkshire Hathaway, FedEx, Infosys, Rakuten, Volvo, Ralph Lauren and U.S. Department of the Treasury. ADBE’s strategic partnerships with Microsoft and Alphabet are also shaping its growth trajectory by driving its customer momentum.
The integration of the Acrobat PDF technology into Microsoft Edge and Alphabet’s Google Chrome is a plus. Adobe is experiencing rising free-to-paid conversions on the back of its Acrobat extensions for Microsoft Edge and Google Chrome.
Adobe’s recent partnership with Microsoft to provide marketing insights and workflows from Adobe Experience Cloud applications and Microsoft Dynamics 365 to Microsoft Copilot in order to assist marketers in creative brief development, content creation and content approval management is noteworthy.
Conclusion
Although the intensifying generative AI battle and the negative impacts of geo-political tensions are risky, the Zacks Rank #3 (Hold) company’s long-term prospects are expected to benefit from its expanding generative AI-powered product portfolio and strength in Firefly.
A strong partner base, expanding clientele, solid momentum in the PDF category, compelling product lines, continued innovation and a growing footprint in emerging markets should drive its top-line growth in the long run.
For fiscal 2024, Adobe projects total revenues between $21.4 billion and $21.5 billion. The Zacks Consensus Estimate for the same is pegged at $21.45 billion, indicating year-over-year growth of 10.5%.
Management expects non-GAAP earnings per share between $18.00 and $18.20. The consensus mark for fiscal 2024 earnings is pegged at $18.16 per share, suggesting year-over-year growth of 13%. The estimate has been revised upward by 0.1% in the past seven days.
Image Source: Zacks Investment Research
Moreover, ADBE is trading at a significant discount, with a forward 12-month P/E of 28.37X compared with the industry’s 33.05X and lower than the median of 37.88X, making it a good opportunity for investors.
Image Source: Zacks Investment Research
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Adobe (ADBE) Gains 17.7% in 3 Months: What Should You Do Now?
Adobe’s (ADBE - Free Report) investors have been enjoying some short-term gains from the stock of late. Its shares have rallied 17.7% in the past three months, outperforming the Zacks Computer-Software industry’s return of 6.8% and the S&P 500’s 10.4% growth.
The company is significantly benefiting from its strong generative AI capabilities. Its expanding AI-powered product portfolio has been a key catalyst in driving its top-line growth. The solid momentum of its family of creative, generative AI models, Firefly, which has been driving growth within the Digital Media and Digital Experience segments, is a major positive.
Adobe’s leading market position in the PDF category is a plus.
ADBE is trading at a significant discount, with a forward 12-month P/E of 24.04X compared with the industry’s 31.85X, making it a good opportunity for investors.
In second-quarter fiscal 2024, the Digital Media segment, comprising Creative Cloud and Document Cloud, witnessed 11% year-over-year growth, mainly driven by the strong adoption of Firefly-powered tools and the Acrobat ecosystem.
The Digital Experience segment, comprising Adobe Experience Cloud, witnessed 9% year-over-year growth on the back of Adobe Experience Platform (“AEP”) powered by generative AI.
ADBE's Three Months Price Performance
Image Source: Zacks Investment Research
For fiscal 2024, Adobe expects Digital Media revenues between $15.80 billion and $15.85 billion. The Digital Experience segment’s revenues are expected between $5.325 billion and $5.375 billion.
Expanding Gen AI-Powered Solutions Aid Prospects
Per a Grand View Research report, the generative AI market size is expected to witness a CAGR of 36.5% between 2024 and 2030. Adobe is well-poised to capitalize on this growth prospect on the back of its strengthening generative AI-powered portfolio of solutions.
Adobe’s unveiling of the Firefly Image 2 Model, Firefly Vector Model and Firefly Design Model to mark a significant advancement in its creative generative AI model family, enhancing creative control, image quality and illustrator capabilities, is a major positive.
The company recently added features to Acrobat AI Assistant to allow customers to ask questions, get insights, and create content from information across groups of PDFs and other document types, including Microsoft Word, Microsoft PowerPoint and text files. It also introduced enhanced meeting transcript capabilities in AI Assistant.
Adobe also offers AEP AI Assistant, which is capable of answering technical questions, automating tasks, simulating outcomes and generating audiences seamlessly.
The launch of Generative Remove in Adobe Lightroom, which is a powerful Firefly-backed tool that helps remove unwanted objects from any photo in a single click in a non-destructive manner, is noteworthy.
The introduction of Adobe Express for Enterprise, which is powered by Firefly Image Model 3, is driving the company’s momentum among various enterprises.
The company recently made Adobe Content Hub with Adobe Experience Manager (“AEM”) Assets generally available. This will enable various brands to manage several creative assets seamlessly with the power of generative AI-backed Content Hub.
In this booming generative AI era, Adobe faces strong competitive pressure from tech giants like Alphabet’s (GOOGL - Free Report) Google, Amazon, Microsoft (MSFT - Free Report) and Meta Platforms, which are continuously making advances to bolster their generative AI capabilities and Large Language Models.
Strong Customer & Partner Bases Drive Growth
A solid portfolio and differentiated approach to AI are attracting an expanding universe of customers across Adobe’s segments.
International Business Machines (IBM - Free Report) is one of the notable customers leveraging Adobe Firefly. IBM was able to generate 200 campaign assets and more than 1,000 marketing variations in moments rather than months using Firefly models.
Adobe’s other key customer wins include Samsung, Comcast, Mercedes-Benz, ULTA Beauty, Maruti Suzuki, ServiceNow, AECOM, AstraZeneca, Chevron, Wells Fargo, Novo Nordisk, Berkshire Hathaway, FedEx, Infosys, Rakuten, Volvo, Ralph Lauren and U.S. Department of the Treasury.
ADBE’s strategic partnerships with Microsoft and Alphabet are also shaping its growth trajectory by driving its customer momentum.
The integration of the Acrobat PDF technology into Microsoft Edge and Alphabet’s Google Chrome is a plus. Adobe is experiencing rising free-to-paid conversions on the back of its Acrobat extensions for Microsoft Edge and Google Chrome.
Adobe’s recent partnership with Microsoft to provide marketing insights and workflows from Adobe Experience Cloud applications and Microsoft Dynamics 365 to Microsoft Copilot in order to assist marketers in creative brief development, content creation and content approval management is noteworthy.
Conclusion
Although the intensifying generative AI battle and the negative impacts of geo-political tensions are risky, the Zacks Rank #3 (Hold) company’s long-term prospects are expected to benefit from its expanding generative AI-powered product portfolio and strength in Firefly.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A strong partner base, expanding clientele, solid momentum in the PDF category, compelling product lines, continued innovation and a growing footprint in emerging markets should drive its top-line growth in the long run.
For fiscal 2024, Adobe projects total revenues between $21.4 billion and $21.5 billion. The Zacks Consensus Estimate for the same is pegged at $21.45 billion, indicating year-over-year growth of 10.5%.
Management expects non-GAAP earnings per share between $18.00 and $18.20. The consensus mark for fiscal 2024 earnings is pegged at $18.16 per share, suggesting year-over-year growth of 13%. The estimate has been revised upward by 0.1% in the past seven days.
Image Source: Zacks Investment Research
Moreover, ADBE is trading at a significant discount, with a forward 12-month P/E of 28.37X compared with the industry’s 33.05X and lower than the median of 37.88X, making it a good opportunity for investors.
Image Source: Zacks Investment Research