Morgan Stanley Reiterates Bullish $510 Target on Adobe (ADBE) Amid GenAI Momentum

Adobe Inc. (NASDAQ:ADBE) is one of the Trending AI Stocks on Wall Street. On August 2^nd, Morgan Stanley reiterated an Overweight rating on the stock with a price target of $510.

The rating affirmation and positive outlook stems from the thesis that Adobe is poised to capture incremental value from several opportunities as generative AI capabilities boost Creative Cloud growth.

According to the firm’s bull case, Creative Cloud + GenAI will expand the user base and push pricing higher. This will in turn deliver a DM revenue CAGR of 13% over FY23-FY26. With improved integration and execution in Digital Experience, an 11% revenue CAGR will be delivered over FY23-FY26. This will take the total revenue CAGR to 12%.

The firm further talked about three growth drivers for Adobe. Its role in managing diffusion engines, its improving digital media ARR growth, and also an accelerated pace of buybacks. It believes Adobe is expanding its models with better capabilities for the end user.

The firm particularly discussed how Adobe is adding abilities like better price and value matching, accelerating GenAI tool adoption into Adobe workflows. This will in turn help investors realize the value of being able to edit a broad set of images in a collaborative environment.

The firm notices a potential for modest upside to 2H Digital Media ARR growth despite guidance including the latest price change.

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Disclosure: None.