Wells Fargo Downgrades Adobe to Underweight, Cuts Price Target to $225

Wells Fargo downgraded Adobe's rating from Equal Weight to Underweight and cut its price target from $270 to $225. The brokerage argues that Adobe's growth challenges are becoming structural rather than temporary.

Analyst Michael Turrin estimated that Adobe's organic net new annual recurring revenue (NNARR) declined by more than 40% in the third quarter. While the acquisition of Semrush contributed approximately $480 million in revenue, it masked underlying weakness in the core business.

The report states that Adobe needs nearly double the previous quarter's NNARR growth in Q4 to meet full-year targets, a difficult feat given competitive pressure and pricing constraints. Risks from AI competitors and management transitions were also cited.

Adobe shares declined on Monday following the news. Wells Fargo forecasts total ARR growth of about 7% for fiscal 2027, below the market consensus of over 8%.