Adobe ADBE is expanding its portfolio for advertisers and publishers with the launch of Real-Time CDP Collaboration in the United States. Built on Adobe Experience Platform, this solution offers advertisers and publishers a secure environment to identify high-value audiences. Advertising agencies, including Alterra Mountain Company, GroupM Wavemaker, Major League Baseball and The Coca-Cola Company, piloted the solution to deliver personalized and performant ads.

Adobe and Warner Bros. Discovery WBD are now partnering for Real-Time CDP Collaboration, under which advertisers can discover new audiences based on consumer preferences within WBD properties. Current publishers also include NBCUniversal, apart from Warner Bros. Discovery. Adobe’s offering allows customers to securely connect data across ecosystem partners, including Snowflake SNOW and identity partners, including The Trade Desk TTD.

Adobe’s prospects benefit from strong demand for its creative products. Its Creative Cloud, Document Cloud and Adobe Experience Cloud products have been driving top-line growth. New AI releases, including Express, Acrobat AI Assistant, Firefly Services, DX premium tiers and GenStudio for Performance Marketing, have expanded the portfolio of products. These are expected to drive Adobe’s market share and monetization in the near future.

Adobe’s expanded partnership with Amazon makes the Adobe Experience Platform available on Amazon Web Services. Partnerships with Google’s Campaign Manager 360, Meta Platforms, Microsoft Advertising, Snap and TikTok are key catalysts.

ADBE Shares Suffer From Stiff Competition

Adobe shares have declined 15.4% in the trailing 12-month period, underperforming the broader Zacks Computer and Technology sector’s return of 22.1% and the Zacks Computer Software industry’s appreciation of 7.2%.

ADBE Stock’s Performance

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Adobe is suffering from increasing competition in the Generative AI (GenAI) space from the likes of Open AI, as well as a lack of monetization of its AI solutions. 

For fiscal 2025, Digital Media Annual Recurring Revenue is now expected to grow roughly 11%. Digital Media segment revenues are expected between $17.25 billion and 17.40 billion, suggesting 9% growth at the mid-point over fiscal 2024. The guidance reflects lower benefits from pricing and more focus on AI user engagement instead of monetization.

Adobe expects total revenues between $23.30 billion and $23.55 billion ($21.51 billion in fiscal 2024). Unfavorable forex and continued move to subscriptions from perpetual offerings are expected to negatively impact revenues by $200 million.

Fiscal 2025 non-GAAP earnings are now expected between $20.20 and $20.50 ($18.42 per share in fiscal 2024).

ADBE’s 2025 Estimate Revision Trends Higher

For fiscal 2025, the Zacks Consensus Estimate for earnings is pegged at $20.39 per share, up by a penny over the past 60 days. The figure indicates 10.69% growth from fiscal 2024.

ADBE’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 2.55%.
 

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $23.45 billion, suggesting 9.04% growth from that reported in fiscal 2024.

ADBE Stock Seems Overvalued

Adobe stock is not so cheap, as the Value Score of D suggests a stretched valuation at this moment.

In terms of the forward 12-month price/sales, ADBE is trading at 8.25X, higher than the sector’s 6.62X.

Price/Sales Ratio (F12M)

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Can Adobe’s Strong Portfolio Help the Stock Recover?

Adobe expanded its GenAI portfolio with the launch of Firefly Image Model 3, enhancements to vector models, richer design models and the all-new Firefly video model. The deep integration of these models into Adobe’s tools, like Lightroom, Photoshop, Premiere, InDesign and Express, has improved the experience of creative professionals globally. Firefly generations now have crossed 16 billion cumulative generations.

Adobe recently launched a couple of new offerings, including Firefly Standard and Firefly Pro, which give customers access to premium Firefly video and audio features. The company released the new Firefly application, which can be used to generate image vectors and now videos with the Firefly Video Model, in a public beta.

Strong Adobe Express adoption by businesses is noteworthy. The increasing number of integrations into leading social, productivity and collaboration apps like ChatGPT, Google, Slack, Wix, Box, Hubspot and Webflow significantly increased Adobe Express’ customer reach.

Adobe’s Document Cloud AI Assistant is now available in Acrobat across desktop, web and mobile and integrated into Chrome, Microsoft Teams and Edge extensions. Adobe GenStudio, which integrates Express, Firefly, Workfront, Experience Manager, Customer Journey Analytics and Journey Optimizer, is riding on strong adoption in the content supply chain for enterprises. 

Adobe is winning clients in both the Creative Cloud and Document Cloud segments. Alphabet, American Express, Coca-Cola, Johnson & Johnson, LVMH, Procter & Gamble, T-Mobile and the U.S. Department of Defense were major additions to the Creative Cloud clientele in the fiscal fourth quarter. Abbott Laboratories, BWI GmbH, Defense Information Systems Agency, Kaiser Permanente, Novo Nordisk, Truist, U.S. Cellular and the U.S. Department of State were major additions to the Document Cloud clientele.

ADBE Stock: Buy or Hold?

Adobe’s deepening GenAI focus and innovative GenAI-powered portfolio are key catalysts. Hence, investors who already own the stock may expect the company's growth prospects to be rewarding over the long term. 

However, stretched valuation makes the stock unattractive for value-oriented investors.

The stock is currently trading below the 200-day moving average, indicating a bearish trend.

ADBE Stock Trades Below the 200-Day SMA

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ADBE currently has a Zacks Rank #3 (Hold), which implies that investors should wait for a more favorable time to accumulate the stock.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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