This Beaten-Down Tech Giant Could Rebound 80% According to Wall Street Expert

Shares of Adobe (NASDAQ:ADBE) have been left out of the great AI rally amid rising competitive pressures from rivals who’ve used generative AI as a battering ram to gain a growing slice of the creative software market. Indeed, Adobe has its own AI (think Firefly) to combat AI. But with the stock recently taking another plunge below $365 per share on the back of a horrid downgrade from a big-name Wall Street analyst, it seems like AI poses more of a threat than a golden opportunity for next-level growth.

Indeed, it’s a highly uncertain time to be a digital creative, especially as image and video generators become more capable over time. Whether we’re talking about Dall-E, Midjourney on the AI image generation side, Figma and Canva in design, or Soro and Veo 3 for video generation, the AI race is one that Adobe must win if it’s to keep its economic moat from narrowing to non-existence.

The case for throwing in the towel is getting stronger as Adobe’s AI foes get stronger. However, we mustn’t discount the tech titan’s ability to adapt, especially since it’s doubling down on AI spend, with CEO Shantanu Narayen stating that AI will touch “every dollar of revenue” going ahead. That’s a big deal, especially as new AI tools open the doors for prospective subscribers.

The downgrades are coming in fast. Adobe must prepare and adapt as the AI wave hits.

It’s rare to come across a “Sell” rating on Wall Street these days, especially when it comes to tech firms that are effectively leveraging the power of AI. In any case, Adobe found itself on the receiving end of a pair of painful downgrades at the start of the month when Rothschild & Co Redburn’s Omar Sheikh and Mizuho Securities’ Gregg Moskowitz both slashed their price targets to $280 per share.

This new, lower target represents a nearly 25% correction from Thursday’s closing price.

Mr. Sheikh thinks the company’s business is being disrupted at the hands of AI. It’s hard to disagree, even if the firm has been boosting its own AI capabilities. Mr. Moskowitz, a former Adobe bull, also factors in AI execution risk as a reason behind his downgrade. Indeed, it’s hard to love Adobe stock after a pair of big price target cuts to kick off the month of July.

Even if Adobe’s AI ends up miles ahead of the competition (some think this is a long shot), there’s still no guarantee that its subscriber base will be nearly as sticky, especially as many graphic designers and other digital creatives find it harder to make a living in an era where clients may be more inclined to simply leverage the power of an AI model to get the job done in record time.

The agentic AI shift could be pivotal for Adobe

In any case, there’s already so much negativity priced into the stock at these depths. With shares of ADBE now down 47% from its high, the big question is how the firm can stage a recovery in the face of some pretty terrifying rivals that may be hungry for a larger slice of Adobe’s market share. Personally, I think Adobe is on the right track by continuing to invest heavily in generative and agentic AI.

There’s more to it than putting Firefly alongside every app in the suite, though. Adobe must demonstrate that it can do what its rivals can’t. As we enter the age of AI agents, Adobe’s Agent Orchestrator needs to outclass the competition, plain and simple.

On the other side of the spectrum, Andy Yu over at DBS Bank has a $660 price target that entails a whopping 80% gain from current levels. Indeed, the bull camp has become that much lonelier in recent weeks. But Yu is a believer in Adobe’s generative AI capabilities as well as its trusted brand. Furthermore, he notes that AI-powered creative tools could drive up demand for content creation. I think Yu is right on the money to highlight the fact that the rise of AI-driven creative solutions will put digital paintbrushes in the hands of just about everybody.

If Adobe gets agents right, perhaps there is an opportunity to stage a rebound, proving the new bears wrong to doubt its abilities to adapt as AI takes center stage. Personally, I think Yu’s contrarian case is robust. Perhaps the recent downgrades fail to consider the tech firm’s ability to play defense.

For Adobe, I think it all comes down to whether management can execute as generative and agentic AI raises the stakes. I think it can.

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