Adobe(US:ADBE) 智通财经网·2025-06-11 08:48Core Viewpoint - Morgan Stanley believes that Adobe's current valuation is attractive, with pricing strategies and the long-term potential of generative AI (GenAI) likely to drive earnings per share (EPS) growth, maintaining an "overweight" rating with a target price of $510 [1] Group 1: EPS Growth Catalysts - Three main factors are identified that could change the direction of EPS growth: optimistic revenue growth trends, ongoing stock buybacks, and mid-term profit margin improvements [2] - The expected annual recurring revenue (ARR) growth for Adobe's digital media business in FY2025 is projected at 11%, with a potential slowdown in the second half due to pricing changes [2][3] - Recent price changes are expected to positively impact ARR, with a projected increase of approximately 15% for FY2025 [3] Group 2: Pricing Strategy and Market Position - Adobe's pricing strategy is crucial for driving product innovation and profitability, especially in a competitive landscape [2] - The flexibility in pricing for lower-end market segments may help mitigate potential customer churn [2] - The company has seen a 15% underperformance compared to large software peers over the past three months, indicating investor concerns about its competitive positioning [1] Group 3: Profit Margin and Stock Buybacks - Adobe has consistently used about 90% of its free cash flow for stock buybacks, leading to an average annual reduction of approximately 2% in its share count [8] - The CFO indicated that there is room for further expansion of operating profit margins in the mid-term, despite current margins being among the best in the industry [7][8] - The company aims for EPS growth to outpace revenue growth once it moves past its current investment cycle [7] Group 4: Market Conditions and Future Outlook - The uncertain macro environment is expected to suppress demand for marketing technology, potentially impacting revenue growth in FY2025 [5] - The digital media ARR growth is anticipated to reach 11% year-over-year, although the range of predictions remains wide due to market uncertainties [6] - The introduction of AI models for video and audio is expected to enhance credit consumption, with significant growth anticipated by FY2026 [4]