In a recent development, BMO Capital has expressed a positive outlook on Adobe Systems (NASDAQ: ADBE) with a particular focus on its long-term Artificial Intelligence (AI) potential. In light of this optimism, BMO Capital has adjusted its price target for Adobe Systems, increasing it from $600 to $640, as revealed in a note released on Tuesday.
BMO Capital’s confidence hinges on the belief that generative AI holds significant promise for Adobe, paving the way for robust net new Annual Recurring Revenue (ARR) growth over the coming years. This anticipated growth, the firm suggests, should underpin consistent mid- to low-teens revenue expansion for Adobe.
Crucially, BMO analysts have pointed to their research, which suggests that users are willing to pay a premium for Adobe’s Creative Cloud offering, especially with the integration of generative AI capabilities. They argue that the introduction of generative AI is poised to attract more users to the Creative Cloud ecosystem. Furthermore, they anticipate that the inclusion of generative AI within the Creative Cloud suite will not only retain existing users but also entice new users to adopt Adobe’s platform.
In the analysts’ assessment, “We believe that Adobe’s strategy will include price increases of 10% to 15%, though these will be moderated at the consumer level, and will facilitate the addition of new users across all categories.”
They further added, “Moreover, we anticipate that Adobe will likely introduce a freemium Firefly SKU to generate pipeline.”
The positive sentiment from BMO Capital underscores Adobe Systems’ growing prospects in the AI domain and its potential to shape the company’s future trajectory. Investors will be closely watching how these developments unfold and the impact they have on Adobe’s market performance.
