Adobe Stock Gains Following Analyst Meeting
Adobe stock is trading higher following a well-received meeting with analysts held in conjunction with the company's Max user conference in Los Angeles. While the meeting did not provide many specific updates on Adobe's near-term financial outlook, there was a focus on the company's expanding range of generative artificial-intelligence tools. This included the debut of the second generation of Adobe's generative AI image model.
Adobe's fiscal year ends in November, and investors will have to wait until mid-December when the fourth-quarter results are reported for a forecast on fiscal 2024. However, commentary from Adobe's Chief Financial Officer, Dan Durn, hinted at a positive outlook. In an interview, Durn mentioned that they expect 2023 to be an extraordinarily strong year for the company and that the fourth quarter was also strong.
UBS analyst Karl Keirstead cautioned investors about reading too much into these comments, pointing out that Adobe made similar statements last year, and the results ended up being only a modest beat. However, Keirstead acknowledged that the commentary likely limits downside risk, especially as Adobe begins charging customers for access to its Firefly generative AI software.
Durn reiterated in an interview that Adobe expects only a modest impact from AI in the November quarter, with a greater impact anticipated in fiscal years 2024 and 2025. Keirstead also noted concerns about how the adoption of Firefly could affect Adobe's margins, as running large language models can be expensive. The Street is uncertain whether Adobe's pricing strategy for Firefly is aggressive enough to prevent margin erosion.
Currently, Adobe stock is trading 3.2% higher at $549.78.
Adobe's Commitment to Efficiency and AI Technologies
Adobe is making significant strides in driving efficiency while introducing AI technologies to the market, according to company spokesperson Durn. Amid this period of technological transformation, he emphasizes Adobe's commitment to maintaining consistent and stable operating models.
With a disciplined approach, Adobe aims to avoid the margin degradation experienced by some competitors. Durn highlights the company's image-generation models as being more efficient than large-language models that rely on a broader range of data.
Figma Acquisition and Regulatory Progress
Regarding Adobe's recent acquisition of collaborative design software company Figma, Durn expresses confidence in the transaction, reiterating the company's belief in its merits. The company anticipates updates from European and U.K. regulators in the coming months.
Positive Reception from Analysts
Kirk Materne, an analyst at Evercore, remains impressed after the event and reaffirms his Outperform rating on Adobe stock with a target price of $605. He emphasizes Adobe's continued investment in innovation, particularly in generative AI, which has already contributed to the creation of over three billion creative assets within a six-month period.
Mark Moerdler, an analyst at Bernstein, shares Materne's enthusiasm for Adobe's AI software portfolio. He notes that Adobe sets itself apart from competitors by leveraging AI to enhance the creative process and streamline repetitive tasks, rather than solely focusing on quick image creation. Moerdler also highlights Adobe's unique offering of image, video, audio, and 3-D Generative AI functionalities, predicting that it will drive long-term growth.
In conclusion, Adobe's commitment to efficiency, innovative AI technologies, and the potential benefits arising from its acquisition and AI software portfolio have garnered positive responses from industry analysts.
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