Evercore ISI Reiterates Outperform Rating and $650 Target for Adobe Ahead of Q3 Earnings

Evercore ISI analysts reiterated an Outperform rating on Adobe (NASDAQ:ADBE) with a price target of $650, emphasizing the company's attractive fundamental setup despite a less pronounced valuation discount. The company is set to report its Q3/2024 earnings on Thursday.

Initially, Adobe's Digital Media Net New Annualized Recurring Revenue (NNARR) guidance of $1.9 billion had caused the stock to drop, as it was lower than investor expectations. However, since then, the strong momentum of Adobe’s Firefly, driving both NNARR and usage levels, has exceeded guidance for the first two quarters of the year.

Despite the stock's 23% rise in the last three months due to strong results, the analysts expect further upside with Adobe's third-quarter results, leading into the MAX event in October. Historically, Adobe's third quarter has seen more substantial increases in NNARR guidance, and this year is expected to follow that trend. The analysts forecast that Adobe’s NNARR for the year could approach $2 billion, with potential additional upside in the fourth quarter. Furthermore, pricing headwinds that impacted the first half of the year are expected to turn into tailwinds for the second half, while products like Acrobat AI Assistant and Firefly continue to show strong momentum and could contribute further to future growth.