Adobe’s (ADBE) shares, which have just hit a one-year low, may have an even tougher road ahead.
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On Friday, investment banking titan Citi (C) slashed its price target on the creative software giant alongside other industry names such as Similarweb (SMWB), HubSpot (HUBS), DocuSign (DOCU), Veeva (VEEV), and Autodesk (ADSK).
Citi Goes ‘More Selective’ on Software Stocks
Specifically, Citi’s Tyler Radke slashed his ADBE price target by 12%, from $287 to $253, implying about 10% upside. Radke also refused to move up his Hold rating on Adobe’s shares, noting that he could not see any meaningful events that could pump up the San Jose, California-based company’s shares and those of its peers over the next 12 months.
The three-star analyst further noted that his team was “turning more selective” in the application software group and downgraded the shares of all six companies.
Radke’s latest call came just a day after Anthropic launched Project Glasswing, a new initiative backed by several major tech partners.
The project is expected to showcase Anthropic’s most powerful AI yet, the Mythos model, which has been said to be capable of autonomously spotting security flaws in traditional software. The announcement rattled software stocks, particularly cybersecurity names.
Adobe Faces the AI Test
For Adobe, the bearish rating comes as its shares, down about 34% year-to-date, have continued to struggle as fears of AI rendering the traditional software sector obsolete have stubbornly gripped the industry. This fear of disruption recently wiped out almost $1 trillion from the sector’s market value.
Piling on this concern are questions about Adobe’s AI strategy as its longtime CEO Shantanu Narayen plans to step down. This is even though the company recently tripled its AI-first annual recurring revenue within a year and surpassed Wall Street’s estimates in its most recent quarterly results.
Is Adobe Stock a Strong Buy?
On Wall Street, analysts have turned increasingly bearish on Adobe’s shares and currently have a Hold consensus rating on the stock. This is based on nine Buys, 14 Holds, and three Sells issued by 26 analysts over the past three months.
However, the average ADBE price target of $318.33 implies over 38% upside from current trading levels.
