Adobe (ADBE) stock is under pressure on June 12 even as the software giant delivered a fiscal Q2 beat, posting $6.62 billion in revenue and $6.96 a share of earnings (EPS).
Management even raised its full-year profit and revenue guidance, but investors seem to be focusing more on what came alongside the numbers: the abrupt departure of CFO Dan Durn, effective June 15.
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Plus, the company announced a pivot toward a freemium growth model that traders fear will dent near-term revenue.
Following the post-earnings slump, Adobe shares are already down about 40% year to date, but Wall Street analysts are increasingly calling for continued downside ahead.
www.barchart.comStifel Sees a Swift Recovery in Adobe Stock as Unlikely
Stifel’s senior analyst J. Parker Lane downgraded ADBE stock this morning to “Hold” and lowered his price target to $200, signaling a lack of meaningful upside from current levels.
In his research note, Lane credited the earnings beat but said the freemium pivot – prioritizing user acquisition over near-term recurring revenue – is a trade-off hard to digest for investors.
Plus, the sudden departure of Durn on top of CEO Shantanu Narayen’s planned exit later this year, adds another layer of uncertainty at a time when Adobe’s ability to navigate the era of AI assistants is already under the microscope.
Note that ADBE does not currently pay a regular cash dividend either.
Other Analysts Have Also Turned Their Back on ADBE Shares
On Friday, Alex Zukin – a top Wolfe Research analyst – also downgraded Adobe shares to “Peer Perform,” framing the company’s Q2 release as “thesis changing.”
His concern also centers on the combination of slowing annualized recurring revenue (ARR) and back-to-back C-suite departures, which, he believes, may limit upside in ADBE for the foreseeable future.
Other firms that revised estimates for the software stock today include Evercore ISI that now rates it at “Hold” with a lowered $225 price target.
According to its analyst Kirk Materne, until management can demonstrate that its freemium funnel converts to durable revenue growth, Adobe will remain in the “show me” mode.
How to Play Adobe After Q2 Earnings?
Heading in the Q2 release, Wall Street had a consensus “Moderate Buy” rating on ADBE shares with a mean price target of about $316.
However, it’s reasonable to assume that leadership uncertainty will invite more downward revisions like that of Stifel, Wolfe Research, and Evercore ISI in the days ahead.
www.barchart.com On the date of publication, Wajeeh Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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