Adobe gains as Wall Street expresses optimism after Summit event

Adobe (NASDAQ:ADBE) was in focus on Wednesday after it made several announcements at its annual Summit event, including updates to its Firefly generative artificial intelligence tool, all of which seemed to renew an optimistic feeling on Wall Street.

Shares rose 0.7% in premarket trading.

"We come away still confident GenAI is a [long-term] tailwind for content creation & for ADBE despite significant investor skepticism," Wells Fargo analysts led by Michael Turrin wrote in a note. They reiterated their Overweight rating $675 price target.

Adobe is likely to see an "uptick in growth" in 2024 to roughly 20% year-over-year, the analysts said, following a partner breakfast at the event. The Adobe partners expressed optimism there is a [significant opportunity] in GenStudio to connect and automate the creative-to-marketing workflow, which could be "supercharged" by generative AI.

And while there has been much attention paid to Firefly, adoption of it is likely to happen in 2025, and the real story "will come from custom models built on top," the analysts said.

Morgan Stanley analyst Keith Weiss also expressed optimism, stating that the company present a "solid vision" of how generative AI presents a differentiated flywheel between content creation, workflow, activation and analytics building for its Enterprise customers.

"While competition in SMB and consumer remain outstanding debates, investor narrative should inflect more positively," Weiss wrote. He has an Overweight rating and $660 price target on Adobe.

Adobe's approach and strategy to generative AI has left J.P. Morgan analyst Mark Murphy feeling "incrementally positive" following the conference, citing its ability to integrate the technology across its products and expand its markets.

"While announcing certain GenAI-related product capabilities and industry partnerships, Adobe reiterated that the early stages of gradual revenue tailwinds from its GenAI products would be weighted toward 2H FY24 and that the roll-out of a text-to-video generation solution would likely be later in the year as well, a topic that has come to the forefront since the launch of OpenAI's Sora text-to-video generation product," Murphy wrote.

"Net-net, while Creative Cloud growth is currently a bit slower than investors had hoped at this point in the cycle, we continue to see Adobe as a thoughtful, innovative industry leader as it moves to transition GenAI solutions from theory to practice for customers."

Murphy has a Neutral rating and $570 price target on Adobe shares.