Zacks Investment Ideas feature highlights: Adobe

For Immediate ReleaseChicago, IL – June 11, 2025– Today, Zacks Investment Ideas feature highlights Adobe ADBE.Buy This Tech Stock (ADBE) Down 40% for AI-Powered UpsideAdobe stock trades 40% below its all-time highs heading into its Q2 FY25 earnings release on Thursday.The creative software powerhouse, which has doubled the Tech sector over the past 15 years, tanked as Wall Street worries about slowing growth and valuation levels.Most importantly, investors need to know if Adobe can fend off the rapid acceleration of artificial intelligence offerings that enable users to generate high-end creative content from images to videos with the click of a button and almost no skills.Adobe is not going down without a fight, rolling out AI features throughout its portfolio. On top of that, the creative software giant has continued to improve its artificial intelligence-powered content creation service, Adobe Firefly, since it launched over two years ago.ADBE stock is holding ground at a key technical range and trading at a discount to Tech in terms of forward earnings.Now might be the time for investors to consider buying beaten-down Adobe on the dip for long-term upside.Why Adobe Stock is Down 40%Adobe's revenue growth has slowed recently, averaging 11% sales expansion between FY22 and FY24. This came after the owner of Photoshop grew its sales by 15% to 25% for seven straight years after transitioning to a subscription model.The slower revenue growth forced Wall Street to recalibrate its valuation, especially in a higher interest rate environment. Adobe's earnings revisions also moved sideways over the past few years, though its actual earnings grew significantly.Wall Street was also disappointed that Adobe had to scrap its planned Figma acquisition over regulatory headwinds in late 2023. Adobe is still waiting for another opportunity to deploy its cash and diversify.Most critically, investors are worried that Adobe's creative software suite could become essentially obsolete because of AI.Multiple generative AI companies allow people to create intricate, high-quality images, videos, and beyond at lightning speed without any training, design skills, or technical expertise.Adobe Can Succeed in an AI-Driven Creative EnvironmentAdobe's industry-leading creative software has been used by everyone from Hollywood movie studios and best-selling artists to college students and offices for years. ADBE's offerings include Photoshop, Premiere Pro, Illustrator, and Lightroom.On top of its core design-focused software, Adobe expanded its more traditional business-related segments beyond PDFs and e-signatures.Wall Street worries that even Hollywood studios and other giants will utilize AI more and more. Meanwhile, marketing companies, advertisers, and beyond are even more likely to turn to artificial intelligence for their creative content creation needs.Adobe has crucially rolled out artificial intelligence features into Photoshop and beyond to combat new-age AI-focused challengers. Most importantly, it unveiled its creative generative AI platform, Firefly, in 2023. It has gone all in on its Firefly AI platform since then.The company boasted in an April 24 press release that "Adobe Firefly has revolutionized the creative industry and generated more than 22 billion assets worldwide" since its debut.The firm unveiled the latest release of Firefly at the end of April, which "unifies AI-powered tools for image, video, audio, and vector generation into a single, cohesive platform and introduces many new capabilities.""Firefly has evolved into the ultimate creative AI solution, designed to be commercially safe from the ground up. Leading brands, including Deloitte, Tapestry, Paramount+, and Pepsi, have harnessed Firefly to streamline workflows and scale content production, resulting in faster time-to-market, better performing campaigns, and innovative, personalized experiences."Adobe's generative AI features are designed to be commercially viable, while other services could run into a ton of copyright infringement issues and other legal battles.On top of that, Firefly for mobile "will be able to generate amazing images and videos on the go, right from your iOS or Android device."Adobe is projected to grow its revenue by 9% in FY25 and 10% in FY26 to reach $25.63 billion. ADBE's adjusted earnings are projected to jump by 11% and 13%, respectively.The company has beaten our bottom-line estimates for five years running. Its earnings estimates have held up since its Q1 FY25 release in early March after it reaffirmed its FY2025 financial targets, boosted by its ability to "capitalize on the acceleration of the creative economy driven by AI."Time to Buy Adobe Stock on the Dip and Hold?Adobe stock has soared nearly 1,500% in the past 15 years to double the Tech sector. This huge outperformance includes a 2% climb in the past five years vs. Tech's 110%. ADBE is trading around where it was five years ago after holding its ground near its pre-Covid selloff highs.The tech stock is back above its very long-term 21-week moving average while trading at roughly neutral RSI levels.ADBE is trading 40% below its highs and 20% below its average Zacks price target. Plus, on the speculative side, Adobe (currently trading at $416 a share) could announce a stock split at some point to make it more appealing to retail investors and traders.The selloff, mixed with its solid earnings growth outlook, has it trading at a 75% discount to its all-time highs and 33% below its median at 23.5X forward 12-month earnings.Adobe is even trading at a 10% discount to the Tech sector despite its long-term outperformance.Why Haven't You Looked at Zacks' Top Stocks?Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.Today you can access their live picks without cost or obligation.See Stocks Free >>Media ContactZacks Investment Research800-767-3771 ext. 9339support@zacks.comhttps://www.zacks.comPast performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. 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