Adobe’s ‘MAX’ event showcasing AI power draws praise from analysts

This week’s updates from Adobe’s (NASDAQ:ADBE) to show off its artificial intelligence prowess are being seen as a big positive for the software giant, according to analysts.

Through rapid expansion and enhancement of its generative AI capabilities, Adobe is following through on its commitment to helping creators produce better work and harness AI, said Ahan Vashi, Investing Group Leader for The Quantamental Investor.

“While the GenAI investment boom has been concentrated in hardware infrastructure stocks like Nvidia thus far, software platforms such as Adobe are likely to reap greater reward than infrastructure players over the long run,” Vashi commented. “Currently, Adobe stock is fairly valued, and I like the idea of buying ADBE to participate in the next big wave of investing fund flows in GenAI technology.”

Adobe announced the general availability of Adobe GenStudio for Performance Marketing and expanded its Firefly family of generative AI models to video, in addition to new breakthroughs in its Image, Vector and Design models. In all, more than 100 new Creative Cloud features were introduced.

Generative AI services have become the talk of the town since the launch of ChatGPT in 2022. Globally, companies have launched their own large language models, which can provide services such as content, image, video and voice generation, to name a few.

Meta Platforms (META) has several generative AI products, including Emu Video, Emu Edit, text-to audio model AudioCraft, all-in-one multimodal and multilingual AI translation model SeamlessM4T.

Microsoft (MSFT)-backed OpenAI has ChatGPT, text-to-image tool DALL·E 3, text-to-video model Sora, and GPT-4 Omni for audio, vision, and text, among others. Meanwhile, Microsoft itself has Copilot, whereas tech giant Alphabet’s Google (GOOG) (GOOGL) has Gemini.

Despite the crowded space, analysts are positive on Adobe’s announcements.

“I saw the news and I think the newly unveiled ‘100 Creative Cloud features across AI’ from Adobe should further solidify the firm’s standing as a leader in the creative artificial intelligence market,” said Danil Sereda, Investing Group Leader for Beyond the Wall Investing. “The release of Adobe GenStudio performance marketing with large brands will likely enhance the business growth opportunities in the next few years.”

However, Adobe’s share price performance may be restricted, Sereda added, citing rosy forecasts from Wall Street.

“So the news may result in the undervaluation of [Adobe] now, partially justifying Wall Street’s optimism. However, I don’t think investors should be looking for [huge] business growth because of these enhancements alone.”

Meanwhile, Bank of America kept its Buy rating and $640 price target on Adobe following the event.

The key takeaway is these capabilities are more tightly woven into flagship offerings, such as Photoshop and Adobe Express, which may be a catalyst for upsell across the creative installed base of an estimated 42,000 subscribers, analysts led by Brad Sills said.

They added that while the emphasis for AI monetization is on proliferation and upsell, they think generative credits could become a meaningful component to growth longer term.

Deutsche Bank analysts led by Brad Zelnick came away from the event confident in the company’s generative AI leadership and its ability to facilitate hyper-personalization at scale. This is expected to drive sustained double-digit revenue growth over the long term, according to the analysts.

Deutsche Bank has a Buy rating and a $650 price target on Adobe.