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Adobe Inc. could be in the midst of a strong quarter, but that’s not the only reason a Mizuho analyst is feeling more upbeat about its stock.
Mizuho’s Gregg Moskowitz cheered Adobe’s
ADBE,
long-term picture as he upgraded the shares to buy from neutral Friday, noting that the company “remains very well-positioned to benefit from digital transformation with its highly comprehensive end-to-end offering.”
Additionally, Moskowitz said he thinks Adobe’s fundamentals are improving within its Digital Media and Digital Experience units, and he’s increasingly optimistic that generative artificial intelligence can help spur interest in the company’s products.
The company has shown off its new Firefly product, which is a series of AI models that can initially be used for image and text generation. Adobe has a user conference next month and therefore may announce Firefly pricing ahead of that event, according to Moskowitz.
Read: Adobe enters AI fray with Firefly
“While details are unknown, our expectation is that ADBE will price it attractively,” he wrote. “Given a large Digital Media installed base and substantial productivity enhancements from Firefly, we believe this could drive strong attach and be perceived positively by the Street.”
See also: Salesforce’s AI-fueled stock rally may need to cool — and Morgan Stanley prefers another software play
Ahead of Adobe’s Sept. 14 earnings report, Moskowitz said his “enterprise checks were generally healthy, and more interestingly indicative of a much better [fiscal fourth quarter.]” But he also wrote that his upgrade “isn’t about a call on the quarter.”
Though Moskowitz said he is upbeat about the fundamental aspects of Adobe’s business, he acknowledged that Wall Street “may be downplaying the risks” surrounding Adobe’s pending $20 billion deal for Figma that is being scrutinized by regulators.
“Many bulls have expressed excitement that a deal would clearly strengthen ADBE’s positioning (we agree), but also that failure to close this transaction would enable higher margins and increased buyback/[earnings] power,” he wrote.
“While the latter is technically true, we believe that rationale glosses over the fact that an ADBE without Figma could eventually raise significant questions about the health of its longer-term growth profile (particularly if the GenAI impact ends up being something less than powerful),” Moskowitz continued.
Adobe’s shares were up about 2% in premarket trading Friday. The company’s stock has risen 67% so far this year as the S&P 500
SPX
has increased 16%.
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