Artificial intelligence is a boon to Adobe that can’t be ignored, according to Wells Fargo. Analyst Michael Turrin upgraded the software stock to overweight from equal weight and raised his price target to $525 from $420. Turrin’s new target implies a 19.6% upside from where shares finished Thursday. “The AI debate continues to drive ADBE,” he said in a note to clients Friday. “We come away from recent work more confident Gen AI is a tailwind to ADBE as we expect much of the early value to accrue to established platforms & see potential for further break-out as products are monetized.” Shares rose 2.8% in premarket trading Friday. The stock has outperformed the market so far this year with a more than 30% advance. ADBE YTD mountain Adobe, year to date Turrin said the competitive environment is moderating for Adobe, especially considering AI art generator Firefly “presents a much needed next act” and is a “natural extension” of the company’s focus on digital media. He also said organizations attempting to cut costs within IT should help increase the popularity of Adobe’s DM and DX platforms. He also said the DM platform should have improved pricing power thanks to Firefly. DX could also get an underappreciated boost from AI, the analyst said, given that marketing and design is considered an ideal candidate for early use of the technology amid what is expected to be a huge increase in content. Turrin also raised estimates for earnings per share and revenue for the 2024 and 2025 fiscal years to reflect the impact of Firefly and other AI advancements. As a stock, he said Adobe has a stand-out profile given the fact that profitability stats support valuation. A tailwind from AI-enabled products could help drive future rebounds and outperformance, the analyst added. The upgrade comes ahead of Adobe’s second-quarter earnings call scheduled for Thursday. — CNBC’s Michael Bloom contributed to this report.
