Adobe share price target cut by CFRA on earnings outlook
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On Friday, CFRA adjusted its outlook on Adobe (NASDAQ:), reducing the 12-month price target to $630 from the previous $700. The firm maintained a Buy rating on the stock, despite the downward revision. The adjustment is based on a price-to-earnings (P/E) ratio of 30 times CFRA’s calendar year 2025 earnings per share (EPS) forecast, which is considered to be below the company’s historical average.
Adobe reported its February-quarter earnings per share at $4.48, surpassing both the year-ago figure of $3.80 and the consensus estimate of $4.38. The company’s sales increased by 11%, fueled by growth across its major segments: Creative Cloud, Document Cloud, and Digital Experience, which saw increases of 11%, 18%, and 10% respectively.
CFRA expressed a positive outlook on Adobe’s financial health, highlighting the acceleration in Remaining Performance Obligations (RPO) growth, which went up by 16%. Additionally, the firm took note of Adobe’s announcement of a new $25 billion share buyback program, which represents about 10% of its market capitalization, and a 20% growth in net new Creative Annualized Recurring Revenue (ARR), excluding the impact of prior pricing increases.
Despite Adobe’s guidance falling below consensus expectations, CFRA sees potential for the company’s ARR growth to pick up pace in the next nine months. This optimism is partly due to Adobe’s plans to leverage new AI offerings, such as an AI Assistant in Acrobat/Reader, to drive further monetization.
The report also acknowledges the increasing competitive pressures faced by Adobe, particularly from entities like Sora OpenAI. However, CFRA believes that Adobe’s ongoing development of its own competitive offerings, combined with the potential boost from video editing tools, positions the company well for future growth.
CFRA also notes that Adobe stands to benefit from its large existing customer base, strategic partnerships, and comprehensive capabilities that span from ideation to editing, processing, and publishing.
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