BMO Capital is positive on Adobe Systems' (NASDAQ:ADBE) longer-term AI opportunity and raised its price target for the stock to $640 from $600 in a note Tuesday.
The firm remains confident that generative AI can help Adobe grow net new ARR over the next several years, which it believes should support durable mid- to low-teens revenue growth.
BMO analysts noted that their firm's survey work indicates users would be willing to pay more for Creative Cloud with generative AI capabilities and that generative AI should lead to a net increase in Creative Cloud users. In addition, the firm feels the end-to-end workflow, which includes generative AI within Creative Cloud, will cause existing users to stick with Adobe and mean new users are more likely to adopt Adobe.
"We believe that Adobe's strategy will include price increases of 10% to 15%, though lower at the consumer level, and adding new users in all categories," wrote the analysts.
"Further, we think Adobe will likely offer some form of freemium Firefly SKU to generate pipeline," they added.