This article first appeared on GuruFocus.
Adobe (NASDAQ:ADBE) shares climbed 2.5% Thursday even after William Blair downgraded the software maker, citing mounting competition in the creative software market.
Analyst Arjun Bhatia lowered the rating to Market Perform from Outperform, pointing to pressure on Adobe’s core Creative Cloud business, according to a research note.
Bhatia said artificial intelligence has rapidly democratized skills once held by creative professionals, allowing newer players to gain traction. Canva now generates about $4 billion in annual revenue and is growing more than 30%, while Figma is at roughly $1.2 billion with 40% growth, he noted. Other entrants include Midjourney, Runway and offerings from Google and OpenAI.
The analyst acknowledged Adobe’s shares appear inexpensive at about nine times free cash flow but said uncertainty around pricing power, long-term economics and the company’s ability to differentiate in AI could keep the stock range-bound until there is more clarity.
