KeyBanc starts Adobe with underweight rating, $44 stock target

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KeyBanc starts Adobe with underweight rating, $44 stock       target
Credit: © Reuters.

On Wednesday, KeyBanc Capital Markets initiated coverage on shares of Adobe Systems Incorporated (NASDAQ: ADBE ), assigning an Underweight rating with a stock price target of $44.00. The move reflects concerns about increasing competitive pressures in the digital media content creation market, particularly from generative AI and emerging low-end tools.

The firm noted Adobe's Creative Cloud has long been dominant in its field, transitioning from a niche product to a staple technology across various sectors, including education and enterprise. However, this dominance and Adobe's high market share and margins are now seen as potential opportunities for competitors.

Adobe's recent introduction of Firefly, aimed at countering the rise of AI-driven creative tools, was acknowledged as a positive step. Nevertheless, the firm anticipates that the rapid release of new text-to-image and text-to-video AI products will continue to challenge Adobe's market position.

KeyBanc expects these competitive dynamics to decelerate the growth of Adobe's Creative Cloud to high single digits, increasingly reliant on pricing strategies. Despite Adobe's strong margins and valuation, which are currently at a premium compared to its growth profile and peers, the analysis suggests that the balance of risks and rewards has shifted unfavorably.

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