Piper Sandler analyst Brent Bracelin has maintained an optimistic stance on Adobe Inc., assigning the company an Overweight rating and setting a price target of $635. Bracelin views Adobe as a high-quality and established software franchise within the large-cap sector, positioning it well for a promising risk-reward scenario heading into 2025. He sees the potential for Adobe to shift its status from trailing behind competitors to leading the market, supported by its strong fundamentals and growth prospects.
Despite facing challenges such as AI threats and quarterly volatility in the NNARR segment, Adobe's performance has been overshadowed by these issues, leading to a 10% decline in shares Year-to-Date compared to the S&P 500's 28% increase. However, Bracelin pointed out the positive trends in subscription growth and the enhancement of current Remaining Performance Obligations (cRPO) growth metrics, indicating resilience and potential for future growth in Adobe's market position.
Looking ahead, Adobe's upcoming earnings announcement is expected to shed light on the company's subscription growth sustainability and its operational efficiency, characterized by an operating margin model of approximately 46%. While investor sentiment remains mixed and might take time to fully reverse, Bracelin envisions a path for Adobe's earnings per share (EPS) to grow by over 13% annually and reach $30 or more by 2028. The analyst's reevaluation of Adobe's prospects reflects the anticipated impact of new product development momentum on earnings per share and valuation multiples in the coming year, signaling positive momentum for the company's stock performance.