Adobe (ADBE) was downgraded to Market Perform from Outperform by BMO Capital Markets as the financial firm believes shares will remain range-bound due to increasing competition and no perceptible positive catalysts on the horizon.
BMO also reduced its price target to $375 from $400.
“We believe that Adobe’s valuation is attractive though faces greater competitive threats in the creative market and thus remains at the bottom of our pecking order in the front office market,” said BMO analysts, led by Keith Bachman, in a Friday investor report.
Regarding the front office application sector, BMO recommends Salesforce (CRM) and HubSpot (HUBS) over Adobe, which both have Outperform ratings.
BMO’s recent Creative Cloud Survey found that competitive dynamics are increasing, particularly among smaller businesses, students and freelancers. More than 50% of students surveyed are using rival Canva over Adobe. It also indicated that nearly 50% of freelancers are using Canva compared to about 10% using Adobe.
Adobe’s Creative Cloud is a subscription service that offers a suite of applications for design, photography, video and web creation.
“The most common answer to our tool usage question was that respondents are using both Creative Cloud and Canva, at over 50% of total respondents,” BMO reported. “About 30% of users use only Canva, and about 20% of users use only Creative Cloud. Hence, there are more total users of Canva vs. Adobe. Given Adobe’s preexisting market share, we view this negatively.”
Recent reports indicate Canva will likely pursue an initial public offering sometime in 2026 or 2027. Canva’s chief financial officer, Kelly Steckelberg, helped Zoom (ZM) go public in 2019.
“At Canva, we aspire to be a generational company, so the timing will be about when it best supports that mission,” Steckelberg said in an interview last year with CFO Brew. “In the meantime, we are focused on running the business with public company standards and rhythms, because that foundation will make us stronger.”
Adobe shares were down 2% during morning market action on Friday. Its share value has declined by about 20% over the past year. In comparison, the iShares Expanded Tech-Software Sector ETF (IGV) has ticked up 7%