Key Takeaways
- Adobe received an Underweight rating from Morgan Stanley, with its price target slashed from $365 down to $240
- Salesforce’s rating was reduced to Equal-weight, with price target falling from $287 to $185
- Premarket trading saw Adobe decline approximately 4%, with Salesforce and Intuit experiencing similar losses
- Key concerns include unclear AI monetization paths, executive turnover, and weakening revenue acceleration
- Wall Street consensus still favors Salesforce over Adobe for potential upside opportunity
In a sweeping reassessment of enterprise software leaders, Morgan Stanley delivered bearish outlooks on both Adobe and Salesforce on Tuesday, triggering share price declines during premarket hours.
Before regular trading commenced, Adobe’s stock retreated approximately 3.8%. Salesforce experienced a decline of nearly 2.9%, with Intuit and Workday both tumbling over 4%.
Leading the research update, analyst Adam Wood initiated the rating adjustments, slashing Adobe to Underweight status and establishing a revised price objective of $240āa substantial reduction from the previous $365 target. Salesforce similarly faced a downgrade to Equal-weight, with Wood lowering the price target from $287 to $185.
Adobe’s Challenges According to Morgan Stanley
Morgan Stanley’s primary worry regarding Adobe centers on execution timeline. While the software company continues pushing innovation forward, these developments have yet to materialize into accelerated top-line performance.
The company is currently navigating a transition toward freemium pricing structures while simultaneously ramping up investment in artificial intelligence capabilities. Compounding this complexity, Adobe faces concurrent leadership changes at both the CEO and CFO levels, introducing additional operational uncertainty.
Wood highlighted vulnerability in certain segments of Adobe’s creative workflow ecosystem, where emerging AI-first competitors could potentially capture market share. Despite Adobe’s continued dominance among professional creative users, the timeline for sustainable growth momentum appears increasingly extended.
The investment bank emphasized that these simultaneous strategic pivots create visibility challenges around when annual recurring revenue growth will show substantial improvement.
Salesforce Faces Scrutiny Despite AI Promise
While Morgan Stanley acknowledges potential in Salesforce’s artificial intelligence initiatives, particularly the Agentforce platform, Wood stressed the need for concrete proof that these innovations will translate into subscription revenue expansion.
Legacy product lines such as Commerce and Tableau remain headwinds to consolidated growth performance. Without clear evidence that Agentforce and similar offerings can compensate for these underperforming segments, Wood anticipates constrained appreciation potential.
The Equal-weight designation reflects expectations that shares may trade within a confined range absent demonstrable acceleration in growth metrics, according to the analyst.
Workday similarly received an Underweight designation with a $145 price objective. Morgan Stanley recognized Workday’s formidable competitive moat within the software landscape but expressed skepticism that its AI initiatives will generate significant near-term revenue contribution.
Intuit entered coverage at Equal-weight with a $335 price target. Morgan Stanley characterized market anxieties about large language model disruption to Intuit’s tax and accounting franchises as exaggerated, though the firm ranked lower in preparedness for the evolving AI landscape.
Morgan Stanley highlighted Microsoft, Palo Alto Networks, CrowdStrike, Cloudflare, Datadog, ServiceNow, Snowflake, and Shopify as preferred investments within the software sector.
Examining broader Street sentiment, Salesforce maintains a Moderate Buy consensus among analysts with an average price objective of $239.94, suggesting approximately 38% appreciation potential. Adobe holds a Hold consensus rating, with the average target sitting at $258.90, indicating roughly 10% upside from current levels.
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