Adobe CEO Shantanu Narayen speaks in an interview with CNBC at the New York Stock Exchange on February 20, 2024.
Brendan McDermid | Reuters
adobe The company reported better-than-expected first-quarter results but lower quarterly revenue expectations, and its shares closed down nearly 14% on Friday.
The move marked the stock’s biggest drop since September 15, 2022, when it closed down 16.8%.
The design software company reported adjusted earnings of $4.48 per share, topping analysts’ expectations of $4.38, according to LSEG (formerly Refinitiv). Its revenue of $5.18 billion beat analysts’ expectations of $5.14 billion.
Adobe expects adjusted earnings per share for the quarter of $4.35 to $4.40, compared with analysts’ expectations of $4.38. The company said total revenue would be between $5.25 billion and $5.30 billion, slightly below expectations of $5.31 billion. The company also announced a $25 billion stock buyback.
Adobe also recently launched an artificial intelligence assistant for its Reader and Acrobat applications that can help users digest information from long PDF files.
Bank of America analysts lowered their price target on Adobe stock to $640 from $700 and reiterated a buy rating on the stock, expressing optimism about the company’s generative AI image creation tool Firefly.
“Our view that Adobe is a major beneficiary of artificial intelligence has not changed,” analysts wrote in an investor note Thursday. “While monetization has been slower than expected, Firefly is the (most) widely used One of the generative AI products with the potential for multiple monetization paths.”
Barclays lowered its target price on Adobe stock to $630 from $700 while maintaining an overweight rating on the stock. Its analysts wrote on Friday that they expect the stock to rebound and “will buy the dip as pricing masks the potential upside of Creative Cloud.”
Morgan Stanley analysts maintained an overweight rating and $660 price target on Adobe stock, writing on Friday that “more patience may be needed.”
“Slower-than-expected growth in digital media net new ARR may increase investor concerns about competitive pressures,” the analysts wrote. “However, a growing number of GenAI monetization vehicles and new monetization solutions will Going live in 2H24, this should help improve things going forward.”
—CNBC’s Jordan Novet contributed to this report.
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