BMO cuts Adobe stock target to $610, maintains outperform rating

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On Friday, BMO Capital Markets adjusted its outlook on Adobe shares (NASDAQ:), reducing the price target to $610 from the previous $660, while keeping an Outperform rating on the stock. The adjustment comes after Adobe reported its quarterly results, which included a modest net new Annual Recurring Revenue (ARR) beat.

Despite this, the company did not raise its full-year guide, which may have been a source of disappointment for some investors.

The firm noted that the quarter’s results and the maintained full-year guide imply that the potential for upside in net new FY24 ARR might be limited. However, BMO Capital sees the current valuation of Adobe’s stock as compelling.

The firm also highlighted that, excluding the impact of price changes, Adobe’s Creative net new ARR grew by over 20% for both the first quarter of FY23 and FY24. This growth is attributed to an increase in the number of seats and a favorable product mix.

BMO Capital expressed confidence in Adobe by retaining the Outperform rating, despite the lowered price target. The firm pointed out that the over 20% growth in Creative net new ARR, net of price changes, is a positive sign. This growth indicates the company’s ability to expand its customer base and enhance its product offerings, which can be seen as encouraging factors for the stock’s future performance.

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