Adobe stock has evolved from one of the hottest trades in Wall Street into one of the top laggards. It plunged to a low of $309, its lowest level since November 2022, and 55% below its highest level in 2021 it has erased billions of dollars in value as the market capitalization dropped from over $340 billion to the current $129 billion.
Analysts are concerned about the Adobe stock
Wall Street analysts are highly bearish about Adobe, one of the top companies in the technology industry. Oppenheimer analysts downgraded the stock from outperform to market perform, citing its potential disruption by more advanced AI tools.
Goldman Sachs has a sell rating and a price target of $290, while BMO and Jefferies recently downgraded the company. As a result, the consensus target for the stock has dropped from $575 12 months ago to the current $406.
The main bearish view is that AI tools are becoming so advanced that demand for some of their products will continue to wane over time. Also, investors believe that some of its recently launched AI products have a long way to go.
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Most importantly, the company has been disrupted by firms like Figma and Canva. Canva, an Australian company, has become a major name in the design industry, with the valuation in the private market rising to over $42 billion.
Additionally, the company has moved from being a fast-growing tech giant to one whose growth trajectory has stalled. The most recent results showed that its revenue jumped by 10% and reached a record high of $6.19 billion in the fourth quarter of FY’25.
The company ended the quarter with Remaining Performance Obligations (RPO) of $22.5 billion, a number that analysts expect will continue to grow.
ADBE has become a bargain
On the positive side, Adobe has become a bargain on most metrics. For example, the company has a forward PE ratio of 13.9, lower than the five-year average of 30 and the sector median of 25.
Additionally, the company has a forward PEG ratio of 1.07, which is also lower than the sector median of 1.71.
The company also has a good Rule-of-40 multiple as its growth remains at 10% and its EBITDA and net income margins are at 30% and 40%, respectively. This means that the lowest multiple is ~40, which is a sign that its growth and margins are balanced.
Supporting the view is the fact that analysts expect that its revenue and profitability growth will continue in the future. The average estimate is that its revenue will be $26 billion and $28.35 billion, up by 9% YoY.
Its earnings-per-share (EPS) is expected to move from $20.95 in 2025 to $23.45 this year. The earnings per share is expected to move to $26.3 in the next financial year.
ADBE stock price technical analysis
The weekly chart shows that the Adobe stock price has been in a strong downward trend in the past few months, reaching a low of $309, its lowest level since October 22.
A closer look shows that the stock has formed a giant falling wedge pattern whose two lines are about to converge. A wedge is one of the most common bullish reversal signs in technical analysis.
Therefore, there is a likelihood that the stock will rebound in the coming years as the company has become a bargain. If this happens, the next key resistance level to watch will be at $350. The alternative scenario is where it drops and hits the key support level at $272, its lowest level in September 2022.
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