According to the Zhitong Finance APP, investors in Adobe (ADBE.US) are increasingly concerned about competition from generative AI. This Photoshop manufacturer's financial report will show how it is responding to the threat.
Earlier this week, Melius Research downgraded Adobe's stock rating from "buy" to "hold," citing risks from OpenAI and Google's image and video generator. Adobe's stock price has fallen more than 20% this year, and Wall Street is evaluating the company's prospects in the age of AI.
Sean Sun, portfolio manager of Swonburg Investment Management Company, said, "Companies will pay for software that can provide measurable returns on investment, but if an AI platform can only provide one version of a product as a feature, then it is less clear which services will provide returns.""Adobe is integrating AI into its own products, but AI image and video capabilities are becoming very good and very fast - if people stop paying for Adobe software and turn to AI, it could be a loser.
Software companies specializing in AI such as Microsoft (MSFT.US), Palantir (PLTR.US) and C3.ai (AI.US) have performed well this year. However, companies such as Salesforce (CRM.US), Workday (WDAY.US), MongoDB (MDB.US) and UiPath (PATH.US) have suffered sell-offs, warning that enterprise IT spending is weak, which could also affect Adobe.
The outlook for Adobe's last financial report was poor, highlighting concerns about competition. Expectations for the company's full-year net income have fallen 13% in the past three months, but revenue expectations remain stable.
Since the release of its financial report in mid-March, the company has been working to reassure investors. AI-related products released by Adobe at its annual peak have received positive reviews.
It is worth noting that Adobe will release its latest financial report after the U.S. post-market on Thursday, with expectations of a 20% increase in net income and a nearly 10% increase in revenue. Over the next few fiscal years, Adobe's annual revenue is expected to grow at a double-digit rate, while free cash flow is expected to grow 13% this year and accelerate to nearly 25% next year.
The current expected PE ratio of the stock is 24 times, which is lower than the long-term average level. Among the analysts tracked by Bloomberg, more than 75% recommend buying the stock, and the average target price indicates an increase of more than 30%.
Winners and losers in AI may quickly change.
Brent Fredberg, portfolio manager at Brandes Investment Partners, said, "Many software companies will struggle in the competition for AI, but from a valuation perspective, some companies are becoming attractive, and the market may realize that the risks they face are not as great as previously thought."
"We focus on data-rich companies because AI is data-intensive, and these companies have strong balance sheets and financial resources to invest in their own AI products," he said.
The development of AI is so rapid that winners and losers may quickly change. Alphabet was once seen as a loser, but now it is widely regarded as a leader.
Michael Mullaney, global market research director at Boston Partners, said, "We are still in the early stages of AI, so we don't know what it means for software demand or efficiency, especially if some companies can provide almost all services." "Some companies will be very fragile, but others will truly benefit. This feels like calm before the storm."
Apple's (AAPL.US) stock price soared 7.3% on Tuesday, its biggest single-day gain since November 2022, as investors bet that the company's new AI features will stimulate iPhone upgrade cycles. The rebound added more than $210 billion to the company's market cap.