TLDR
- Adobe (NASDAQ:ADBE) stock rose in premarket trading ahead of Q3 earnings, expected to report $5.18 EPS and $5.91B revenue
- Stifel maintained Buy rating with $480 price target after Adobe announced general availability of multiple AI agents
- Multiple analysts cut price targets but maintained positive ratings, with Oppenheimer noting low expectations going into earnings
- Adobe stock is down over 21% this week despite tech sector hitting new highs
- Company’s AI agent rollout includes Data Insights agent and Product Support Agent, with 10 total agents planned
Adobe stock climbed 0.7% in Thursday’s premarket trading as investors prepared for the company’s third-quarter earnings report. The gains came despite a brutal week that saw shares fall over 21% while tech indices reached new highs.
Wall Street expects Adobe to report adjusted earnings of $5.18 per share for Q3 fiscal 2025. Revenue projections stand at $5.91 billion, representing growth from the year-ago period’s $4.65 EPS and $5.41 billion in sales.
The premarket bounce followed Stifel’s reiteration of its Buy rating and $480 price target. Analyst Parker Lane highlighted Adobe’s rollout of AI agents as a key growth driver for the Digital Experience business segment.
Adobe announced the general availability of multiple AI agents on Wednesday. These tools were first unveiled at Adobe Summit in March as part of a planned suite of 10 AI agents.
The company previously made its Data Insights agent available in June. It also introduced the Product Support Agent during that timeframe.
AI Strategy Takes Shape
Stifel views the AI agent rollout as a way for Adobe to monetize automation capabilities. The analyst noted that bringing these agents to market could support continued growth in the Digital Experience division.
Adobe’s AI strategy remains in early stages according to Stifel’s assessment. However, the firm sees the general availability announcement as a positive development for future prospects.
The company’s gross margins of 89% provide strong fundamentals for growth initiatives. Revenue growth of nearly 11% also supports the investment in AI capabilities.
Retail sentiment on Stocktwits showed extreme bullishness at 91 out of 100. Message volume reached extremely high levels as earnings approached.
One user asked whether the stock could reach $500. Another trader reported taking a small position at $249, hoping earnings could reverse the recent decline.
Analyst Adjustments Continue
Multiple firms adjusted their price targets downward ahead of the quarterly report. Oppenheimer cut its target to $460 from $500 while maintaining an Outperform rating.
RBC Capital reduced its target to $430 from $480. Mizuho Securities lowered theirs to $460 from $530.
UBS made the largest cut, dropping their target to $400 from $430. The firm rates Adobe as Neutral.
Oppenheimer analyst Brian Schwartz said the bar was low going into earnings. He noted that Adobe’s valuation reflected significant negative sentiment.
The analyst expects limited material disclosures in the Q3 report. Adobe will likely save major announcements for its MAX customer conference in October.
Schwartz sees limited downside risk given current multiples at five-year lows. The valuation compression has created a more attractive entry point for investors.
Deutsche Bank maintains a Hold rating with a $475 price target. TD Cowen also holds a Hold rating at $470.
The consensus shows cautious optimism despite the recent stock weakness. Many analysts view current levels as oversold relative to fundamentals.
Adobe closed Wednesday’s session at $350.16, down 1.10%. The stock trades with a PEG ratio of 0.54, suggesting the market may be undervaluing growth potential.
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