Adobe Stock Drops Despite Solid Core Business as AI Monetization Falls Short
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Adobe beat Q1 estimates, but stock dropped 14% due to slower than expected AI monetization efforts. Guidance for Q2 also fell short.
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Despite no AI revenue yet, core business remains strong - record revenue and 16% growth in remaining performance obligations.
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Adobe's AI offerings, especially Firefly, continue seeing strong adoption. Management expects Firefly to drive growth in second half of 2024.
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Termination of $20B Figma acquisition removes debt burden and allows Adobe to focus resources on in-house AI development.
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Valuation attractive at current levels given growth prospects. Price target of $561 suggests 12% upside potential.