Adobe (ADBE.US) falls out of value for money? Bank of America Securities joins the bearish camp: AI continues to erode growth momentum.

Bank of America Securities resumes coverage of Adobe (ADBE.US) with an "underperform" rating and a target price of $190. The Bank of America Securities analyst team led by Tariq Liani stated, "As generative artificial intelligence (GenAI) lowers the barrier for content creation and intensifies competition from low-cost and native AI alternative solutions, the company's growth prospects face increasing risks. We believe that while some professionals will still focus on pixel-level fine manipulation and continue to use Adobe's tools, over time, artificial intelligence may replace a significant portion of the core market share, putting pressure on pricing and user growth." The analysts believe that Adobe's own AI strategy is largely defensive, helping to enhance user engagement and retention, but its ability in generating high-quality annual recurring revenue (ARR) at scale is limited. The analysts added that the likelihood of accelerated growth in the short term for Adobe is low. Bank of America Securities' report focuses on a key question: Can Adobe re-accelerate growth in the age of artificial intelligence? The analysts believe that while the penetration rate of the company's AI products has significantly increased, there is currently insufficient evidence to suggest that it can bring about a significant increase in ARR. The contribution of pure artificial intelligence business to ARR is still less than 2%. The analysts pointed out that the main risks are concentrated in the low-end and amateur user groups, who can use "good enough" AI outputs to replace paid workflows, while professional and enterprise applications, although more resilient, still cannot completely avoid risks. The team led by Liani also stated that the company's shift to value-added free and consumption-based billing models brings profit risks. The analysts expect growth to slow over time, predicting a decrease in growth rate from 10.5% in the 2025 fiscal year to 8.8% in the 2027 fiscal year, with no apparent signs of short-term recovery. The Liani team stated, "Valuation is attractive, but there are currently no catalysts. The 2027 fiscal year EV/FCF multiple for the stock is 8 times, which is at a lower level compared to its peers in the industry. However, we believe that low valuation alone is not enough to drive the stock to outperform the market. We give a 7 times EV/FCF multiple for the 2027 fiscal year, reflecting two core logics of the company's long-term growth downturn and the rising uncertainty of commercialization realization prospects. We expect the company's profit margin and free cash flow performance to remain strong, but there is a limited upside in valuation as there is no clear evidence that the monetization capability of artificial intelligence will significantly improve or that growth will accelerate." In contrast, HSBC is more optimistic about Adobe's prospects. The bank recently upgraded Adobe's rating from "neutral" to "buy" and raised the target price from $282 to $308, citing the limited disruptive effects of artificial intelligence on the company's business. HSBC's team, led by analyst Stephen Belsey, stated that Adobe's second-quarter revenue increased by 12.7% year-on-year, and the company provided guidance for a full-year revenue growth of 11.8% for the 2026 fiscal year. Based on the above data, they have not observed any substantial impact from AI-driven competitors. The team believes that "the market has overestimated the negative impact of AI design tools, and the risk-reward ratio is now skewed in a favorable direction, with recent performance remaining strong." TipRanks data shows that on the whole, Wall Street analysts give Adobe a "hold" rating with a target price of $257.19, which is 16% higher than the latest closing price. Year-to-date, Adobe has declined by 37%.