Key Takeaways
- Five firms reset their Adobe (ADBE) price targets in October, from Goldman Sachs’ $200 Sell to HSBC’s $267 Hold, and the stock is down 25% this year.
- Those targets value Adobe at 7.3x to 9.7x the $27.43 per share analysts expect it to earn in fiscal 2027, which is around its lowest forward multiple in five years.
- Analysts still expect Adobe’s earnings and revenue to grow every year through fiscal 2028, though they expect revenue growth to slow.
- The October targets look too cautious unless those estimates start to fall, and Adobe’s fourth-quarter report in December is the next test.
Five Wall Street firms reset their price targets on Adobe (ADBE) in October, and two of them downgraded the stock.
After a 25% drop this year, the shares closed Tuesday at $246.14, inside the range those five targets cover.
That’s a lot of caution on a stock trading at 9.4x forward earnings. It’s also out of step with the wider mood in software.
On this week’s episode of The Prof G Pod, Scott Galloway talked through whether AI is killing software and concluded that “so far the market has said that the rumors of SaaS’s death have been greatly exaggerated.”
Five firms, one tight range
Here are the five calls, from the lowest target to the highest:
- Goldman Sachs: Sell, $200 target, kept on Oct. 2
- Wells Fargo: downgraded to Sell on Oct. 12, target cut to $225 from $270
- TD Cowen: Hold, $245 target, kept on Oct. 2
- Citi: Sell, $207 target from $250, kept on Nov. 4
- HSBC: downgraded to Hold on Oct. 13, target cut to $267 from $310
The most bullish of the five sees 9% upside from Monday’s close. The most bearish sees a 19% drop.
TIKR tracks 40 analysts on Adobe. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Adobe, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Adobe’s Analyst Ratings
Those targets price Adobe near its lows
Analysts expect Adobe’s normalized EPS to keep climbing: to $24.48 in fiscal 2026, which ends in late November, and to $27.43 in fiscal 2027.
Fiscal 2026 is almost over, so a 12-month target is really pricing fiscal 2027.
Divide each target by that $27.43 and you get these multiples: 7.3x for Goldman’s $200, 8.2x for Wells Fargo’s $225, 8.9x for TD Cowen’s $245, 9.1x for Citi’s $250, and 9.7x for HSBC’s $267.
Over the last five years, Adobe’s forward P/E has mostly sat well above all of those multiples.
It’s at 9.4x today. The five-year average is 23x, and the peak was 51x in November 2021. Its five-year low of 7.5x came this June.
So Goldman’s target values Adobe below its cheapest point in five years, and HSBC’s barely moves it off today’s multiple.
That’s a steep discount for a company that analysts expect to grow earnings 17% this year and 12% next year.
The estimates have to hold
Targets this low only make sense if one of two things happens: the multiple stays pinned near its lows, or the earnings estimates come down.
If AI tools cut into what Adobe can charge for its software, the estimates could be the next thing to fall. In that case, today’s targets would look right on a smaller earnings base.
The consensus doesn’t show that yet. Analysts expect revenue to keep rising every year through fiscal 2028.
Growth is expected to slow from 12% in fiscal 2026 to 8% in fiscal 2028.
That helps explain why investors now pay less for each dollar of Adobe’s earnings than they used to. But nothing in Adobe’s latest quarter gives analysts a reason to cut.
In the quarter ended Aug. 28, Adobe posted record revenue of $6.76 billion, up 12% from a year earlier, and non-GAAP EPS of $6.13.
Annualized recurring revenue reached $27.5 billion, and the company raised its full-year revenue and EPS targets in its Q3 release.
OpenAI also looks more like a partner than a rival for now. Galloway noted that Adobe was one of 32 software partners in a marketplace OpenAI launched the same day as Dots, and that Adobe’s stock was up 3% two days after that launch.
Room above $267
The way I see it, the October targets are too cautious on the estimates as they stand.
Even HSBC’s $267 values Adobe at less than 10x next year’s expected earnings, under half its five-year average, while the company is still growing at a double-digit pace.
Of course, I’m counting on those estimates holding. Adobe’s Q4 report in December will show us whether they do.
So what is Adobe stock actually worth?
TIKR lets you forecast the future price of any stock in less than a minute. Just enter a few assumptions into TIKR’s valuation model and see what Adobe could be worth. Start from Wall Street consensus estimates, or adjust the inputs to reflect your own view of the business. It’s free to use.
Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
