Adobe stock target cut to $640 from $650, maintains outperform

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On Friday, TD Cowen made an adjustment to its price target for Adobe (NASDAQ:), bringing it down to $640 from the previous target of $650. Despite this change, the firm has maintained its Outperform rating on the stock.

The revision follows Adobe’s first-quarter performance, which saw its Net New Annual Recurring Revenue (NNARR) surpass the guidance by 5%. However, this figure was slightly below the expectations of some investors.

Adobe’s report indicated that the second-quarter NNARR guidance of $440 million fell short of the market’s anticipation of approximately $460 million. This shortfall is attributed to more significant pricing headwinds in the first half of the year than initially anticipated.

Nevertheless, management has expressed that developments are unfolding as planned and conveyed confidence in the acceleration of Annual Recurring Revenue (ARR) in the second half of the year. This optimism is based on the expectation that pricing will become a tailwind again and that revenue from new artificial intelligence initiatives will start to increase.

The technology company’s latest financial data reflects a mixed outlook, with initial 2023 results showing resilience in its core operations, tempered by caution due to the pricing challenges faced in the near term. Despite the reduced price target, TD Cowen’s stance suggests a belief in Adobe’s long-term growth prospects, particularly with the anticipated benefits from its AI-driven products.

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