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ADBE vs. PEGA: Which Enterprise Software Stock is a Better Buy Now?
ZACKS· 2025-08-25 19:06
Core Insights - Adobe (ADBE) and Pegasystems (PEGA) are key players in the enterprise software sector, focusing on digital transformation through cloud-supported solutions [1] - The digital transformation market is projected to reach approximately $4 trillion by 2027, with a CAGR of 16.2% from 2022 to 2027, indicating significant growth potential for both companies [2] Adobe's Position - Adobe has enhanced its AI offerings with Adobe GenStudio and Firefly Services, facilitating collaboration on marketing campaigns [3] - Tools like Acrobat AI Assistant and Adobe Express are gaining traction among business professionals, with over 700 million monthly active users reported by the end of Q2 fiscal 2025 [5] - Adobe's Digital Media Annual Recurring Revenue (ARR) reached $18.09 billion, reflecting a 12% year-over-year increase, and its AI-first products are on track to exceed the $250 million ARR target by the end of fiscal 2025 [6] Pegasystems' Position - Pegasystems is experiencing strong demand for its AI-powered, cloud-based solutions, with the market expected to exceed $150 billion by 2029 [7] - The company's shift to a subscription-based model has driven a 14% year-over-year growth in Annual Contract Value (ACV) in Q2 2025, supported by the adoption of Pega GenAI Blueprint [8] - PEGA's capabilities include using agentic AI to modernize legacy systems, enhancing application development speed [9] Earnings Estimates - The Zacks Consensus Estimate for Adobe's fiscal 2025 earnings is $20.63 per share, indicating a 12% increase from 2024 [11] - The consensus for PEGA's 2025 earnings has risen by 5.3% to $1.98 per share, suggesting a 31.1% growth from fiscal 2024 [12] Stock Performance and Valuation - Year-to-date, Adobe shares have declined by 18.6%, while Pegasystems has seen a larger decline of 21.8% [13] - Both companies are considered overvalued, with Adobe trading at a forward Price/Sales ratio of 6.11X compared to PEGA's 5.13X [16] Investment Outlook - Adobe's focus on monetizing its AI tools positions it favorably for investors, while PEGA's valuation concerns present risks [19] - Currently, Adobe holds a Zacks Rank 2 (Buy), while Pegasystems has a Zacks Rank 3 (Hold), indicating a stronger investment case for Adobe [19]
Adobe's AI-Powered Portfolio Gaining Traction: What's Ahead?
ZACKS· 2025-08-20 16:41
Core Insights - Adobe is leveraging AI technologies to enhance its product offerings, including GenStudio and Firefly Services, which have seen significant adoption among business professionals and creators [1] - The introduction of Acrobat Studio aims to consolidate Adobe's tools and expand its reach among various user groups, transforming PDFs into interactive knowledge hubs [2] - Firefly is improving the functionality of Creative Cloud applications, attracting users for AI-driven content creation and supporting third-party AI models [3] - Adobe's AI-driven revenue from products like Acrobat AI assistant and Firefly is projected to exceed the $250 million Annual Recurring Revenue target by the end of fiscal 2025 [4] Financial Performance - The Zacks Consensus Estimate for Adobe's Digital Media revenues in Q3 fiscal 2025 is $4.38 billion, reflecting a 9.6% increase year-over-year, while Digital Experience revenues are expected to reach $1.46 billion, indicating an 8.1% growth [5] - Adobe's stock has declined by 18.8% year-to-date, underperforming the broader technology sector, which has returned 11.8% [8] Competitive Landscape - Adobe's AI business remains small compared to competitors like Microsoft and Alphabet, with Microsoft benefiting from its Azure AI services and AI Copilot products, which have reached 100 million monthly active users [6] - Alphabet is heavily integrating AI across its services, enhancing its search capabilities and driving engagement with features like AI Overview, which has 2 billion monthly users [7] Valuation Metrics - Adobe shares are currently trading at a lower forward price/earnings ratio of 16.02X compared to Microsoft's 32.51X and Alphabet's 19.48X, indicating a premium valuation [12] - The Zacks Consensus Estimate for Adobe's fiscal 2025 earnings is $20.63 per share, suggesting a 12% year-over-year growth [17]
Adobe Drops 9% in a Month: Should You Buy the Dip in ADBE Stock?
ZACKS· 2025-08-12 17:26
Core Insights - Adobe's shares have declined 9% in the past month and 25% year to date, underperforming the broader tech sector and software industry [1][4] - The decline in share price is attributed to modest revenue growth prospects, stiff competition in the AI space, and a challenging macroeconomic environment [2][3] Financial Performance - Adobe's fiscal 2025 revenue outlook has been raised to between $23.5 billion and $23.6 billion, with non-GAAP earnings expected between $20.50 and $20.70 per share [17] - Remaining Performance Obligations (RPO) increased 11% on a constant currency basis, while current RPO grew 10% in Q2 of fiscal 2025 [2] - Digital Media Annual Recurring Revenue is expected to grow 11% year over year, with segment revenues projected at $17.45 billion to $17.50 billion for Digital Media and $5.8 billion to $5.9 billion for Digital Experience [18] Competitive Landscape - Adobe's AI business is significantly smaller compared to competitors like Microsoft and Alphabet, which are leveraging AI for substantial revenue growth [3] - Adobe faces competition from Microsoft-backed OpenAI and DocuSign in the document services and e-signature domain [2][3] Product Development and Strategy - Adobe is expanding its AI portfolio with products like GenStudio and Firefly, aiming to enhance product adoption and meet a $250 million Annual Recurring Revenue target by the end of fiscal 2025 [11] - The company is integrating AI tools such as Acrobat AI Assistant and Adobe Express to improve user experience and streamline content creation [12][13] - Adobe's strategy focuses on providing a comprehensive AI-powered creative platform that addresses the needs of creative and marketing professionals [13][16] Valuation and Market Position - Adobe shares are considered overvalued with a Price/Book ratio of 12.36X compared to the sector's 10.75X [7] - Despite the valuation concerns, Adobe holds a Zacks Rank 2 (Buy) and a Growth Score of B, indicating a favorable investment opportunity [20]
Add These 4 GARP Stocks to Your Portfolio to Receive Handsome Returns
ZACKS· 2025-07-30 14:55
Core Insights - The GARP (Growth at a Reasonable Price) strategy combines value and growth investing, focusing on undervalued stocks with solid growth prospects [1][2][7] GARP Strategy Overview - GARP investing aims to provide an ideal investment by utilizing features from both value and growth investing, targeting stocks priced below market value with strong cash flow and earnings potential [3][4] - Ideal growth rates for GARP investors are between 10% and 20%, focusing on stable growth rather than super-normal rates [3] Screening Parameters - Stocks selected under the GARP strategy must have a Zacks Rank of 1 (Strong Buy) or 2 (Buy), with last 5-year EPS and projected 3-5 year EPS growth rates between 10% and 25% [6] - A return on equity (ROE) greater than the industry average and P/E and P/B ratios less than the industry average are also key criteria [6] Promising GARP Stocks - GE Aerospace is experiencing strong demand for commercial engines and expects organic revenue growth in the low-double-digit range for 2025, with a year-to-date stock surge of 62.1% [9][10] - Autodesk is benefiting from new business growth and strong demand for its cloud-based products, with a year-to-date return of 3.7% [12][13] - Adobe's tools are gaining traction, with over 700 million monthly active users, although the stock has declined 16.6% year-to-date [14][16] - Sprouts Farmers Market is well-positioned in the natural and organic food market, planning to open at least 35 new stores in 2025, with a year-to-date return of 23.5% [17][18][19]
Adobe Trades 38% Below 52-Week High: Right Time Buy the ADBE Stock?
ZACKS· 2025-07-21 17:46
Core Insights - Adobe shares closed at $365.79, approximately 38% below its 52-week high of $587.75, with a year-to-date appreciation of 17.7%, underperforming the Zacks Computer and Technology sector and the Zacks Computer – Software industry [1][2] Financial Performance - Since the second-quarter fiscal 2025 report on June 12, Adobe shares have dropped 11.5%, reflecting modest revenue growth prospects amid stiff competition in the AI space [2][9] - Fiscal 2025 revenues are projected between $23.5 billion and $23.6 billion, with non-GAAP earnings expected between $20.50 and $20.70 per share [15][16] - Digital Media Annual Recurring Revenue is expected to grow 11% year over year, with segment revenues anticipated between $17.45 billion and $17.50 billion [16] Competitive Landscape - Adobe's AI business is small compared to competitors like Microsoft and Alphabet, which are leveraging AI for significant revenue growth [3] - Adobe faces competition from DocuSign in the document services and e-signature domain [3] AI Portfolio Development - Adobe is expanding its AI portfolio with products like GenStudio and Firefly Services, tracking ahead of its $250 million Annual Recurring Revenue target for fiscal 2025 [4][9] - The company reported a Digital Media ARR of $18.09 billion, up 12% year over year [4] User Engagement and Product Innovation - Adobe's tools, such as Acrobat AI Assistant and Adobe Express, are gaining traction among business professionals and creators, with over 700 million monthly active users [12] - The Firefly App enhances Creative Cloud applications and supports third-party models, which is expected to boost its popularity [13] Strategic Guidance - Adobe's strategy includes leveraging the Adobe Experience Platform to deliver personalized customer experiences, enhancing advertising effectiveness [14] - The Zacks Consensus Estimate for third-quarter fiscal 2025 earnings is pegged at $5.16 per share, indicating a 10.97% growth from the previous year [17] Investment Outlook - Despite a premium valuation and competition, Adobe's focus on monetizing its AI tools presents a positive outlook for investors, supported by a Zacks Rank 2 (Buy) and a Growth Score of B [18]
Buy These 5 AI-Focused Stocks to Tap Double-Digit Short-Term Upside
ZACKS· 2025-07-21 13:05
Industry Overview - The artificial intelligence (AI) infrastructure space is gaining momentum, with previous concerns about DeepSeek being overstated. The global trend towards digitization is creating opportunities in markets such as 5G, blockchain, and AI. Companies are rapidly adopting generative AI, machine learning (ML), blockchain, and data science to secure a competitive edge [1] Company Recommendations - Five AI-focused stocks with favorable Zacks Ranks that have potential for double-digit returns in the short term are HubSpot Inc. (HUBS), Okta Inc. (OKTA), Adobe Inc. (ADBE), NICE Ltd. (NICE), and Teradata Corp. (TDC). Each stock carries either a Zacks Rank 1 (Strong Buy) or 2 (Buy) [2] HubSpot Inc. (HUBS) - HubSpot provides a cloud-based customer relationship management platform and is experiencing steady multi-hub adoption from enterprise customers. Pricing optimization in its starter edition is leading to solid client additions [5][6] - The integration of HubSpot AI features is enhancing customer value, and its seat pricing model reduces barriers for customer engagement. The growing adoption of inbound applications is a positive factor [6] - Expected revenue and earnings growth rates for HubSpot are 15.4% and 15%, respectively, for the current year, with a slight improvement in earnings estimates [7] - The short-term average price target for HUBS indicates a potential increase of 39.7% from the last closing price of $542.41, with a maximum upside of 71.5% [8] Okta Inc. (OKTA) - Okta operates as an identity partner, offering a suite of products for identity management and security. The company leverages AI to enhance security and user experience [10][11] - Expected revenue and earnings growth rates for Okta are 9.4% and 16.7%, respectively, for the current year, with an improvement in earnings estimates [13] - The average short-term price target for OKTA suggests a potential increase of 29.9% from the last closing price of $95.43, with a maximum upside of 55.1% [14] Adobe Inc. (ADBE) - Adobe has integrated AI applications across its flagship products and introduced generative AI-driven tools like Adobe Firefly. The company is diversifying into digital marketing services [15][16] - Expected revenue and earnings growth rates for Adobe are 9.5% and 11.8%, respectively, for the current year, with a recent improvement in earnings estimates [17] - The average short-term price target for ADBE indicates a potential increase of 35.2% from the last closing price of $365.79, with a maximum upside of 65.4% [18] NICE Ltd. (NICE) - NICE is benefiting from the strength of its cloud business and the adoption of AI-powered solutions, enhancing customer experience through its CXone platform [19][20] - Expected revenue and earnings growth rates for NICE are 7% and 11.2%, respectively, for the current year, with an improvement in earnings estimates [21] - The average short-term price target for NICE suggests a potential increase of 33.9% from the last closing price of $153.41, with a maximum upside of 95.6% [22] Teradata Corp. (TDC) - Teradata is experiencing strong cloud annual recurring revenue (ARR) growth, supported by strategic partnerships and demand for its AI solutions [23][24] - Expected revenue and earnings growth rates for Teradata are 2% and 8.3%, respectively, for the next year, with a slight improvement in earnings estimates [24] - The average short-term price target for TDC indicates a potential increase of 19.5% from the last closing price of $21.59, with a maximum upside of 62.1% [25]
Adobe Stock Undervalued, Says Analyst As It Breaks From Cautious Tech Pack, Lifts Guidance
Benzinga· 2025-06-13 18:45
Core Insights - Adobe's stock experienced a decline despite a strong second-quarter earnings report, which included revenue of $5.87 billion, an 11% increase, and adjusted earnings of $5.06 per share, surpassing analyst expectations [1][2] Financial Performance - Quarterly revenue reached $5.87 billion, exceeding analyst estimates of $5.79 billion, with a year-over-year growth of 11% [1] - Adjusted earnings per share were reported at $5.06, beating the expected $4.96 [1] - Digital Media revenue grew by 11%, while Digital Experience revenue increased by 10% [1] Future Guidance - For the third quarter, Adobe anticipates revenue between $5.88 billion and $5.93 billion, slightly above the estimated $5.87 billion, and adjusted earnings per share between $5.15 and $5.20, compared to the expected $5.10 [2] - Full-year 2025 revenue guidance was raised to $23.5 billion to $23.6 billion from a previous range of $23.3 billion to $23.55 billion, with adjusted earnings guidance increased to $20.50 to $20.70 per share from $20.20 to $20.50 [3] Analyst Ratings - Goldman Sachs analyst reiterated a Buy rating with a price target of $570, while Bank of America raised its price target from $424 to $475, maintaining a Buy rating [4] - Piper Sandler also maintained an Overweight rating with a price target of $500 [4] Market Reactions - Despite the positive earnings, Adobe's stock was indicated to drop by 2% after hours as investors assessed the sustainability of its double-digit growth and the impact of AI revenue [5] - Analysts noted that Adobe's AI strategy is evolving and could significantly contribute to future growth, with AI-related products showing strong performance [7][8] Growth Drivers - Adobe Experience Platform and Apps subscription revenue grew by 40% year-over-year, with the Firefly App seeing a 30% increase in first-time subscribers quarter-over-quarter [6] - Document Cloud, particularly the Acrobat AI Assistant and Adobe Express, contributed significantly to Digital Media strength, with 8,000 new customers added [10] Industry Context - The outlook for fiscal 2026 appears more resilient compared to other software companies, indicating effective execution on growth initiatives [11] - Analysts suggest that while growth may moderate, Adobe remains an attractive option for value-oriented investors [13]
Adobe Reports AI-Fueled Earnings Beat
The Motley Fool· 2025-06-12 21:08
Core Insights - Adobe reported a record revenue of $5.87 billion for Q2 2025, reflecting an 11% year-over-year growth, alongside a 13% increase in adjusted earnings per share to $5.06, both exceeding expectations [2][3][6]. Financial Performance - Revenue for Q2 2024 was $5.31 billion, which increased to $5.87 billion in Q2 2025, marking an 11% change [2]. - Adjusted earnings per share rose from $4.48 in Q2 2024 to $5.06 in Q2 2025, a 13% increase [2]. - Operating cash flow improved from $1.94 billion to $2.19 billion, also a 13% increase [2]. - Digital Media annual recurring revenue grew from $16.14 billion to $18.09 billion, a 12% increase [2]. Business Segments - Adobe operates in two main segments: Digital Media and Digital Experience, both of which experienced double-digit growth year-over-year [4]. - The Digital Media segment includes Creative Cloud products, while Digital Experience encompasses the Experience Cloud for customer management [4]. User Engagement and AI Integration - Monthly active users for Acrobat link sharing increased by over 20% year-over-year [5]. - The use of generative AI features in Adobe Express tripled, and traffic for the Firefly app rose by 30% sequentially, with paid subscriptions roughly doubling [5]. Future Outlook - For Q3 2025, Adobe anticipates revenue between $5.875 billion and $5.925 billion, along with adjusted EPS in the range of $5.15 to $5.20, both above analyst expectations [6]. - The full-year forecast is also slightly ahead of consensus estimates [6]. Market Reaction - Following the earnings report, Adobe's stock initially rose by 6% but later settled down by approximately 1.3% in after-hours trading [7]. - The stock's performance may be influenced by its previous 25% rebound from April lows and the slight nature of the earnings beat [8]. Investment Considerations - Adobe's aggressive investment in AI capabilities is expected to drive future growth, with the stock trading at less than 20 times forward earnings estimates [9]. - Any acceleration in growth could serve as a significant catalyst for the stock [9].
Should You Buy, Sell, or Hold Adobe Stock Post Q2 Earnings?
ZACKS· 2025-06-10 16:16
Core Viewpoint - Adobe is expected to report its second-quarter fiscal 2025 results on June 12, projecting total revenues between $5.77 billion and $5.82 billion, with non-GAAP earnings between $4.95 and $5 per share [1][10] Revenue Projections - The Zacks Consensus Estimate for revenues is $5.79 billion, indicating an 8.99% growth from the previous year [2] - The Digital Media segment revenues are projected to be between $4.27 billion and $4.30 billion, suggesting a 9.3% year-over-year growth [3] - The Digital Experience segment revenues are anticipated to be in the range of $1.43 billion to $1.45 billion, with a consensus estimate of $1.43 billion indicating an 8.3% year-over-year growth [4] Earnings Expectations - The consensus mark for earnings has remained at $4.96 per share, reflecting a 10.71% growth from the year-ago quarter [2] Growth Drivers - Adobe's strong Generative AI portfolio and partnerships with major companies like Amazon, Microsoft, and Alphabet are expected to drive top-line growth [5] - The launch of Firefly Image Model 3 and enhancements to existing models have improved user experiences across Adobe's tools [6] - Increased adoption of Adobe Express by businesses and integrations with popular applications like ChatGPT and Google have expanded customer reach [7] Competitive Landscape - Adobe's Document Cloud AI Assistant is now integrated into various platforms, enhancing its utility for users [8] - Despite strong growth factors, Adobe faces stiff competition in the GenAI space and challenges in monetizing its AI solutions [9][20] Stock Performance - Year-to-date, Adobe shares have declined by 6.4%, underperforming the broader Zacks Computer and Technology sector and the Zacks Computer Software industry [11] - Adobe's current valuation is considered stretched, with a forward 12-month price/sales ratio of 7.22X, higher than the sector's 6.37X [14] Strategic Partnerships - Adobe's partnerships with Amazon and other tech giants enhance its offerings and customer base, particularly through the Adobe Experience Platform on Amazon Web Services [17] - The integration of Acrobat PDF technology into Microsoft Edge and Google Chrome is a significant advantage, contributing to rising free-to-paid conversions [17]
Prediction: 2 Artificial Intelligence (AI) Stocks That Will Be Worth More Than Palantir Within 1 Year
The Motley Fool· 2025-06-05 08:30
Core Viewpoint - The article discusses the strong performance of Palantir Technologies due to advancements in artificial intelligence (AI) and highlights two other AI stocks, Salesforce and Adobe, that are expected to outperform Palantir in the near future [1][2][3]. Palantir Technologies - Palantir has seen a remarkable stock increase of 1,630% since December 2022, with a current market cap exceeding $300 billion [2]. - The company's financial results are strong, with a year-over-year revenue growth of 39% in the first quarter and an operating margin of 44% [6]. - Despite excellent operating results, Palantir's stock is considered overvalued, trading at more than 75 times the management's revenue outlook for 2025 and 175 times EBITDA expectations for the next 12 months [7][8]. Salesforce - Salesforce is enhancing its enterprise software solutions with AI through its Agentforce platform, which has generated around $100 million in annual recurring revenue shortly after launch [9][10]. - The company expects total sales to exceed $41 billion this year, with an operating margin of 34% [10]. - Salesforce stock trades at just 6 times management's revenue guidance, with a forward P/E ratio of 23, and analysts have a median price target of $355, indicating a potential 35% upside [13]. Adobe - Adobe has integrated AI innovations into its creative and marketing software, leading to increased pricing and customer acquisition [14][15]. - The company reported $125 million in annual recurring revenue directly from AI services, expecting this to double by year-end, and $3.5 billion in AI-influenced annual recurring revenue across its portfolio [16]. - Adobe stock trades for about 7 times management's estimate for 2025 revenue, with a forward P/E below 20, and analysts have a median price target of $477.50, suggesting a 19% upside [18][19].