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Cryptopolitan 2024-12-11 16:46:56

Can Adobe lead in AI? Investors await market results in ‘make-or-break’ situation

Adobe Inc. is short on time to persuade investors that it can keep up with artificial intelligence, which is running away as the next big trend in technology markets. According to a recent Bloomberg report , Adobe’s stock has fallen 8.3% this year. The company is lagging behind the broader software sector, which is up more than 30%. This has put more pressure on the results due to come out after the market closes on Wednesday after last quarter’s forecasts let investors down. Graph comparing Adobe stock price and the S&P Software Index. Source: Bloomberg Adobe will need to prove it can profit from its AI tools and fend off new competitors developing generative artificial intelligence (AGI) that can turn prompts into images and videos. Jamie Meyers, a senior analyst at Laffer Tengler Investments, says, “This is a make-or-break quarter.” He continued that investors still need to see if Adobe can make money and remain competitive in the AI race. Still, it is one of the firm’s top picks even if it’s on “probation” for its uncertain AI plans. Adobe’s AI strategy involved attracting customers rather than monetization Adobe has added its own AI technology, Firefly, to products such as Photoshop and Illustrator. However, it has not released its AI video tool as quickly as OpenAI’s Sora . Last quarter, the firm said its main focus was to get customers to use AI features rather than immediately making money from them. The firm is playing the patience card with this approach. Meyers pointed out that Adobe has spent a lot, but investors are still looking for strong returns. He says, “If the tone is negative again, it will be a while before Adobe can shake the sense it is falling behind.” Fourth quarter results are expected to show net profits greater than 13% and revenue more than 9%. However, net new recurring revenue could fall 3.1%, the first dip in a year. Adobe’s Creative Cloud area, including its AI tools, also has weak expectations from investors. Mixed sentiments about performance Tyley Radke, a Citigroup analyst, mentioned in a note that they believe the core business is losing revenue due to bad economic times and competition. Radke also cut his price target, saying Adobe might see little action once the company pulls in new AI customers instead of making a quick dime. Over the last three months, analyst forecasts for 2025 net earnings and revenue have slipped on average. The share price could rise if Adobe can ease long-term growth worries. Currently, its price-to-earnings ratio is less than 27, below its 10-year average of 32. The company’s shares are also cheaper than the software index, which trades at around 38 times earnings. Still, investors crave hard evidence that AI will work. Meyers at Laffer Tengler said that, at this point, the lower valuation makes sense since growth has slowed. “However, getting clarity and seeing tangible monetization from AI could really lead to a catch-up trade. We’re optimistic but cautious,” he added. From Zero to Web3 Pro: Your 90-Day Career Launch Plan

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