Morgan Stanley Downgrades Adobe Inc. (ADBE) but Confident of GenAI Monetization Abilities

Adobe Inc. (NASDAQ:ADBE) is one of the cheap AI stocks to buy right now. On September 24, Morgan Stanley downgraded the stock to an Equal-weight from Overweight and also cut the price target to $450 from $520. Despite the price cut, the stock boasts significant upside potential.

According to the investment bank, Adobe faces uncertainty over its inability to prove that generative AI is a net growth driver for its core business. The remarks come amid decelerating Digital Media ARR, triggering concerns over the company’s ability to prove GenAI as a growth driver. Additionally, Direct GenAI monetization has lagged investor expectations.

Amid the downgrade, Morgan Stanley has reiterated its strong belief in the company’s core value proposition and the expanded value capture opportunity that Gen AI presents. The investment bank has highlighted Adobe’s ability to innovate and monetize GenAI functionality, driving annual recurring revenue growth in the digital media sector.

Adobe Inc. (NASDAQ:ADBE) is a technology company that offers a suite of generative AI tools, empowering teams to efficiently produce on-brand content, personalize assets for diverse audiences, and rapidly extract insights from data.

While we acknowledge the potential of ADBE as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.