ADBE: Thoughts from our virtual fireside

Research evidence excerpt

ADBE: Thoughts from our virtual fireside

Adobe Inc.

Target/Upside/Downside Scenarios Investment summary

We believe ADBE should outperform its peer group overAdobe Inc.

the next 12 months. We expect to see the growing

700 125 Weeks 25JAN24 - 17JUN26 synergies between the Experience Cloud and Creative Cloud

600 create further differentiation in the enterprise market while

500 competitive concerns in our view do not warrant the discount

implied in valuation. We also continue to view generative AI

400 as both a near- and long-term benefit to both the creative and

300 TARGETTARGET 285.00285.00 experience businesses, which we think can be a catalyst to

200 CURRENTCURRENT 196.28196.28 revenue growth and also improve overall investor sentiment.

100 We continue to believe that Adobe represents an attractive

60m mix of growth, margin, and macro durability that positions it

40m

20m well through 2026 and beyond.

2024 2025 2026

J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J

ADBE US Rel. S&P 500 COMPOSITE MA 40 weeks Potential catalysts

Source: Bloomberg and RBC Capital Markets estimates for Target • Dynamic pricing: The company's shift to tiered pricing could

Valuation be a benefit both to revenue growth but also to sentiment

Our $285 price target is based on 12.1x EV/CY27E FCF creating a better narrative around perceived seat count

of $11.2B, a discount to High Efficiency peers (combined headwinds and a more direct correlation between revenue

CY27 revenue growth and FCF margins of 40%+) due to the growth and GenAI investments.

company’s lower growth profile, and a discount to mega-cap • We think opex can come in below implied guidance: A

peers. It is equivalent to 4.7x CY/27E EV/Revenue. Our price combination of lower opex per employee and targeted