Adobe Stock (ADBE) Holds as $1.9B SEMrush Takeover Divides Wall Street

Adobe’s (ADBE) shares traded flat early Thursday as Wall Street analysts greeted the creative software giant’s planned $1.9 billion acquisition of SEMrush (SEMR) with both price target boosts and cuts.

This comes as Adobe is planning to take over the Boston-based marketing software company in a $12-per-share deal. The plan comes amid pressure from investors about its falling market valuation and positioning for possible AI disruption in the creative software market.

SEMrush, which was founded in 2008 and went public in 2021, helps companies improve their online visibility through better search engine ranking. Meanwhile, several Wall Street analysts believe merging the marketing firm with Adobe is a good strategic decision, but a few see some challenges.

Analysts Cheer Potential Boost for Adobe’s Marketing

Stifel Nicolaus analyst J. Parker Lane believes SEMrush’s SEMrush One, a tool that combines traditional search engine optimization (SEO) with AI search visibility in one platform, aligns with Adobe’s LLM Optimizer. The Optimizer is an AI-first tool that helps brands improve their visibility in AI responses given by chatbots such as OpenAI’s (PC:OPAIQ) ChatGPT and Google’s (GOOGL) Gemini.

Lane argued that this feature is particularly important to strengthen Adobe’s position in the digital marketing industry, as more people rely on AI to search and find information. The analyst therefore raised his ADBE price target to $465, implying about 46% upside from Wednesday’s closing price.

Similarly, Bernstein SocGen analyst Mark Moerdler pumped up his price target by about 59% to $508 per share. Moerdler argued that the acquisition is likely to make Adobe compete more directly with companies that focus on improving how sales teams work.

Such a move, the analyst further contended, could result in an overlap between the early stages of attracting people online — that is, top-of-funnel digital marketing — and actually selling to them. This should help further solidify Adobe’s leadership in the “highly fragmented market,” Moerdler added.

Will SEMrush Acquisition Hit Adobe’s Profit Margin?

However, despite maintaining their Outperform (Buy) ratings, analysts Michael Turrin and Gregg Moskowitz from Wells Fargo (WFC) and Mizuho (MFG) cut their price targets on ADBE stock.

While Turrin expects the SEMrush takeover to add about 2 percentage points to Adobe’s revenue growth, the analyst believes it would also drop the software giant’s profit margin by about 0.6 percentage points. Turrin lowered his price target by about 11% to $420 per share — this is still a 32% upside from Tuesday’s closing price.

Similarly, Moskowitz cut his price target by 5% to $390 — still about 29% upside — down from $410 per share.

Is ADBE a Good Stock to Buy Right Now?

Across the broader Wall Street, Adobe’s shares still hold a Moderate Buy consensus rating based on 18 Buys, seven Holds, and one Sell issued by 26 analysts over the past three months.

At $463.83, the average ADBE price target implies over 45% upside potential.

See more ADBE analyst ratings here.