A Wall Street analyst on Monday downgraded Adobe stock to sell from hold as the digital media software firm is seen losing ground amid the disruption caused by artificial intelligence technology.
Melius Research analyst Ben Reitzes turned negative from neutral on Adobe stock and cut his price target to 310 from 400.
On the stock market today, Adobe stock sank 2.2% to close at 333.65.
"The world is coming around to the reality that 'AI is eating software,'" Reitzes said in a client note. Software-as-a-service companies are in the "early innings" of multiple contraction given the shift to AI, he said.
"Former darlings like Adobe, Atlassian and Salesforce are all down more than 20% year to date and still going," he said. "It is still worth highlighting since it could actually get worse."
The worst is potentially yet to come for SaaS players like Adobe, Salesforce and Workday, he said. Value is shifting to "infrastructure winners" like Microsoft and Oracle, he said.
Reitzes cut his sales and earnings estimates for Adobe for 2026 and 2027.
Adobe Stock Has Weak Composite Rating
"AI is making it clear that almost anyone from an able-bodied startup to a big cloud (like Google) can create an application so great that it can compete quickly and potently," he said.
He noted the rise of Adobe rivals Figma, Canva and Runway.
"Our main concern right now is whether Adobe's recent price increases will accelerate moves toward AI-first alternatives," Reitzes said.
Adobe stock has an IBD Composite Rating of 56 out of 99, according to IBD Stock Checkup. IBD's Composite Rating is a blend of key fundamental and technical metrics to help investors gauge a stock's strengths. The best growth stocks have a Composite Rating of 90 or better.
Follow Patrick Seitz on X at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
