Adobe Price Target (ADBE) Lowered Ahead of Earnings, Downside Seen as Limited

Adobe's stock (NASDAQ:ADBE) has provided precious few moments to cheer over recent years, trading 37% lower on the 1 year heading into it's upcoming earnings. A price target cut leading in would not exactly scream bullish, although looking a little deeper and the note is not as bad as might first be feared. The software giant is slated to announce its results on Thursday (September 11), and according to one analyst, the stock's valuation suggests limited downside risk.

Oppenheimer analyst Brian Schwartz lowered the firm's price target on Adobe to $460 from $500, while maintaining an “Outperform” rating. This adjustment is attributed to sector-wide multiple compression, a phenomenon affecting numerous tech companies.

However, Schwartz suggests that Adobe's valuation already reflects considerable negative sentiment, with multiples trading at five-year lows, potentially limiting further declines.

The analyst expects that the upcoming Q3 report is unlikely to significantly alter market sentiment, anticipating that substantive financial or product updates will be reserved for Adobe's MAX customer conference in October.

Other analyst firms have weighed in on Adobe's prospects. JPMorgan maintains an “Overweight” rating with a $580 price target, citing a positive setup for the second half of 2025 driven by generative AI monetization and pricing tailwinds.

Citigroup has a “Neutral” rating, raising its price target from $550 to $621. Stifel and Barclays are more bullish, maintaining “Buy” and “Overweight” ratings, respectively, with price targets of $650 and $675. These varying perspectives highlight the uncertainty surrounding Adobe's near-term performance.

A key element of Adobe's strategy is its investment in generative AI, particularly through its Firefly platform. The company plans to launch the Firefly Video Model later this year, allowing users to generate video content from text prompts. This initiative is aimed at bolstering Adobe's competitive edge in the creative software market. The company is projected to announce earnings per share (EPS) of $5.18 and revenue of $5.9 billion for the quarter. UBS analyst Karl Keirstead expresses confidence in Adobe's near-term stability, noting that while medium-term AI risks persist, current demand and usage appear resilient.

Adobe's future hinges on its ability to effectively monetize its AI initiatives and sustain its market leadership amidst increasing competition. The market's reaction to the Q3 earnings release and the subsequent updates at the MAX conference will be crucial in shaping investor sentiment. While Oppenheimer's lowered price target reflects caution, their “Outperform” rating suggests underlying confidence in Adobe's long-term potential. The stock's current trading level indicates the market has already priced in concerns, and any positive surprises could lead to a significant rebound.