BMO Capital recently reassessed Adobe Systems (NASDAQ:ADBE) following a creative cloud survey and consequently decided to remove the software company from its top pick list. While the survey’s findings were generally positive, BMO expressed significant concerns about increasing competitive threats Adobe faces. Despite these concerns, BMO continues to rate Adobe as ‘outperform’ but has reduced its price target to $660 from $690.
Adobe, known for leading the market in its core product categories of Creative Cloud, Document Cloud, and Experience Cloud, is positioned to potentially benefit from AI and Adobe Express in terms of new annual recurring revenue and growth. However, the survey revealed a notable shift among professional users towards competitors; 57% reported an increased usage of alternative platforms to Creative Cloud, up from 40% in the previous survey conducted in April 2023.
Although enterprise segment data was somewhat more favorable, the overall trend indicates a growing preference for competitors, even among Creative Cloud All Apps license users—considered to be more loyal customers.
Given this increased competition and the subsequent impact on Adobe’s growth prospects, BMO has adjusted its position, stating that its confidence in Adobe’s growth drivers has diminished compared to when Adobe was selected as a top pick in the summer of 2023.