Adobe (ADBE) is back in focus after a sharp sector-wide selloff tied to concerns that new artificial intelligence tools could chip away at traditional software moats and long term business models.
See our latest analysis for Adobe.
Those AI worries have translated into weak momentum, with a 1 month share price return of 19.82% decline and a year to date share price return of 19.17% decline. The 1 year total shareholder return sits at a 38.13% loss, pointing to pressure that has built over several quarters rather than a brief pullback.
If AI driven volatility in Adobe has you rethinking your tech exposure, this is a good moment to look across the sector using our list of 56 profitable AI stocks that aren't just burning cash as potential alternatives to research next.
With Adobe now trading well below many published analyst targets and screens flagging a possible intrinsic discount, the key question is simple: is this pessimism overdone, or is the market already baking in slower future growth?
Most Popular Narrative: 29.7% Undervalued
According to the most widely followed narrative on Adobe, the fair value sits at $383.06 compared with the last close of $269.39. This is a wide gap that hinges on a specific view of how resilient the business remains in the age of AI tools.
The key catalyst is the enterprise adoption of Adobe's generative AI, Firefly. Its "commercial-safe" status, a direct result of being trained on licensed assets, gives it a powerful advantage over competitors in the corporate world where copyright infringement is a major legal concern. This allows Adobe to tap into the durable industry tailwind of digital transformation, leveraging its existing enterprise relationships to drive meaningful new revenue and defend its pricing power.
Curious how that gap between price and fair value is built? The narrative leans on a specific mix of steady revenue growth, strong margins and a lower future earnings multiple than Adobe has carried before. Want to see exactly how those levers interact to reach that $383.06 figure, and how different growth cases shift the outcome?
Result: Fair Value of $383.06 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, this story could change quickly if Firefly adoption disappoints or if competitors continue to chip away at key products such as XD and Creative Cloud.
Find out about the key risks to this Adobe narrative.
Build Your Own Adobe Narrative
If you want to see the numbers for yourself and stress test different assumptions, you can build a custom Adobe view in minutes with Do it your way.
A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding Adobe.
Looking for more investment ideas?
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- Target potential mispricings by checking our list of 55 high quality undervalued stocks that our screener flags based on fundamentals and current market pricing.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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