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Adobe Inc. (NASDAQ:ADBE) is one of the AI Stocks Analysts Are Watching Closely. On January 5, Jefferies downgraded the stock to “Hold” from Buy with a price target of $400, down from $500. While Adobe’s AI tools show adoption and increasing usage, it has had limited monetization amid competition.
The rating downgrade comes as part of the firm’s adjusted ratings in the software sector. The firm believes that investors should stay underweight in software as growth slows and lags other sectors such as semiconductors.
Particularly for Adobe, Jefferies highlighted competitive pressure in the lower-end segment of its market. Analysts noted how casual users have access to numerous AI-enhanced alternatives to Adobe’s Creative Cloud suite.
On the other hand, its business remains “well-protected” among creative professionals and power users who demand “fine-grained control” and the advanced features that Creative Cloud offers.
“Adobe has made significant progress with Al features since Firefly was announced in early 2023. In FQ3, gen Al credit consumption increased 3x q/q, and Al-influenced ARR exceeded one-third of overall business. While heavy Al users must sign up for paid subs plans, ADBE has often run promotions for unlimited usage over the past year or more, implying a continued focus on adoption over monetization in the midst of increasing competition. We do not see acceleration in total revs during our forecast period to FY30.”
– Jefferies analysts, led by Brent Thill, in an investor note.
Adobe Inc. (NASDAQ:ADBE) is a software company that provides digital marketing and media solutions.
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