'No clear catalyst:' BMO downgrades Adobe stock

Investing.com -- BMO Capital Markets downgraded Adobe to Market Perform from Outperform, arguing that the stock lacks a clear catalyst despite an undemanding valuation. The broker also lowered its price target to $375 from $400, while leaving estimates unchanged.

The move follows BMO’s seventh proprietary Creative Cloud survey, which pointed to intensifying competition in the creative software market, particularly among smaller businesses, students, and freelancers.

"While Adobe’s current valuation is undemanding, we do not envision positive catalysts and think the shares will remain range-bound," analyst Keith Bachman said in a Friday note.

While he does not subscribe to the view that application software is structurally broken, Bachman said investor sentiment toward the sector is likely to remain cautious in 2026.

The analyst believes application software will continue to matter over the long term, but near-term performance will depend on “evidence of steady or improving growth,” including the impact of AI features.

Within front-office software, Bachman said it prefers HubSpot and Salesforce over Adobe. He believes Adobe has the "weakest competitive positioning" among the three, citing growing pressure in Creative Cloud and rising willingness among users to adopt third-party tools across the creative workflow.

“We do not envision a clear catalyst for the stock,” he said.

Survey data showed users are increasingly open to using competing tools for both image generation and editing, challenging Adobe’s strategy of remaining a one-stop shop.

Bachman also flagged concerns about Adobe losing traction with freelancers and students, which he views as important contributors to long-term growth.

Moreover, rising competition could limit Adobe’s ability to consistently raise prices, even as users express some willingness to pay more for AI-enabled features, he warned.

Also, the analyst said that high-end seat growth could slow and eventually contract, which would weigh on Adobe’s revenue growth given that high-end creative users generate roughly five to ten times more revenue per seat than low-end users.

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