Jefferies Cautious on Adobe (ADBE) As It Updates Outlook on Software Sector

Core Viewpoint - Adobe Inc. is considered undervalued but faces increasing competitive pressure in the software sector, particularly from AI-enhanced alternatives to its Creative Cloud offerings [2][3]. Group 1: Company Outlook - Jefferies downgraded Adobe from 'Buy' to 'Hold' and reduced its price target from $500 to $400, citing competitive pressures in the lower-end segment [2]. - The firm projects high single-digit revenue growth for Adobe but expresses doubt about achieving low- to mid-teens acceleration without a significant increase in creative AI mindshare [2][3]. - Adobe is viewed as well-protected among creative professionals and power users who utilize its advanced features [2]. Group 2: Market Trends - Jefferies anticipates 2026 will be a year of gradual AI monetization, with overall growth in applications expected to lag behind other segments like semiconductors [3]. - The firm prefers infrastructure investments over applications in the first half of the year, with expectations of improved sentiment towards applications in the latter half [4]. Group 3: Product Offerings - Adobe delivers a range of digital marketing and media solutions, including creative content, customer experience management, publishing, and advertising [4].