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What Led RBC Capital Markets to Increase Adobe’s Price Target?

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Key drivers of earnings growth

Earlier in the series, we discussed the factors that enabled Adobe’s (ADBE) stock to rise ~70% in the last one year. RBC Capital Markets reiterated its “outperform” rating on Adobe’s stock and raised its price target to $235 from the previous $208.

According to Investors.com, Adobe’s CC (Creative Cloud) offering, subscriber growth, and operating expense leverage are the “three powerful drivers for earnings growth over the next three years.” Ross MacMillan, an analyst with RBC Capital Markets, said, “Adobe is just starting to flex pricing for the Creative base which has enjoyed static pricing (excluding promos) since the launch of the service in fiscal 2012.” Stifel Nicolaus and Bank of America also have a “buy” rating on Adobe stock.
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Wall Street analysts’ views on Adobe stock

Adobe didn’t get any sell ratings from the 31 analysts covering the stock. As shown in the chart above, over 75% of analysts covering Adobe have “buy” recommendations on the stock. The remainder have “hold” recommendations.

Investors, as well as the market, seem optimistic regarding management’s comments about progress in AI (artificial intelligence) and machine learning in Adobe’s offerings.

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