Adobe Stocks Fall As Downbeat Forecasts Worry Investors

(CTN News) – Adobe shares dropped 12% on Friday as a lackluster estimate confirmed concerns about rising competition for the company’s creative suite, including Photoshop, and disappointed investors looking for a boost from AI integration.

As part of the company’s digital media segment, which houses its cloud products for documents and creative applications, the company anticipates a net new annual recurring revenue of approximately $440 million in 2018. It was reported that the unit had made $470 million in revenue last year.

In a note published by HSBC analysts earlier this month, the analysts said that they believe AI has significantly eroded many of Adobe’s competitive barriers and the company will continue to face competitive pressure as time goes on.

Startups that are relying on artificial intelligence, such as Stability AI and Midjourney, are looking to challenge Adobe’s years-long dominance over graphics industry.

Adobe CEO Shantanu Narayen said that overall revenue forecast for the second quarter was also below estimates, saying that “expectations were perhaps a little higher than what we would guide for the period”.

It is estimated that if losses continue, the company’s market value will decrease by more than $30 billion. A year after the company’s shares rose by 77% in 2023, the company’s shares have fallen about 4% this year.

A Piper Sandler analyst stated that “mixed messages are difficult to interpret,” adding that is still in the early stages of monetizing AI across its main platforms at this point in time.

As part of its announcement on Thursday, Adobe also announced a $25 billion stock buyback, months after it abandoned its $20 billion deal to acquire cloud-based designer platform Figma due to regulatory issues.

A stock trades for 30,41 times Adobe’s forward profit estimates, compared with 32,87 times for Microsoft (MSFT.O) and 30,42 for Salesforce (CRM.N), indicating that Adobe’s stock is trading at a discount.

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