ADBE Stock On Track To Hit 8-Year Lows – Wall Street Flags Concerns About AI Monetization After Adobe Pushes For ‘Freemium’ Services

• Jefferies said that while Adobe’s push for customer acquisition is likely the right strategy, it leaves AI monetization unanswered.
• Bernstein lowered its price target on Adobe to $379 from $447, according to The Fly.
• Evercore believes investor sentiment is unlikely to turn more positive until a new CEO and CFO are in place.

Shares of Adobe Inc. (ADBE) fell more than 6% in pre-market trading on Friday, tracking its lowest levels since March 2018, after Wall Street sounded concerns that the company’s push to grow users through “freemium” AI offerings is weighing on near-term revenue growth while leaving AI monetization questions “unanswered”.

While Adobe’s second-quarter (Q2) revenue and earnings per share beat consensus estimates, its second-half annual recurring revenue (ARR) growth estimates were lowered due to a strategic shift to acquire more freemium customers through Acrobat and Firefly. Adobe also deferred its previously planned price increases for the Creative Cloud software suite.

Meanwhile, Adobe also announced the departure of its executive vice president and CFO, Dan Durn. In March, long-term CEO Shantanu Narayen said he would step down after a successor is appointed.

Management Transition To Weigh On ADBE’s Near-Term Valuations

Jefferies says that while Adobe’s push for customer acquisition is likely the right strategy, “it adds to the list of transition items and leaves AI monetization unanswered.” The firm also added that it sees no short-term catalyst for the stock, whose valuation is already “depressed.” Jefferies lowered its price target to $230 from $290 and maintained a ‘Hold’ rating, according to The Fly.

Bernstein lowered its price target on Adobe to $379 from $447, citing increased uncertainty amid the company's CFO and CEO transitions, ongoing concerns about AI-driven disruption, and management’s decision to delay monetization initiatives to expand its user base.

Evercore said its expectation that Adobe’s “washed out valuation” would help improve investor sentiment during the CEO transition was incorrect, adding that sentiment is unlikely to improve significantly until new leadership is in place. The firm also sees limited upside to 2027 forecasts. Evercore downgraded Adobe to ‘In Line’ from ‘Outperform’ and cut the price target of $225 from $325.

Traders Mixed On ADBE’s Valuation

Retail sentiment for ADBE on Stocktwits turned ‘extremely bullish’ from ‘bullish’ a day earlier, while message volumes on the platform soared by nearly 2,000% over a 24-hour period.

However, messages were mixed, with one user expecting weeks, if not months, before the stock shows signs of recovery.

Another user said the stock is “grossly undervalued” as Adobe’s fundamentals are solid.

The stock has declined 38% this year.

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