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Key Takeaways
- Adobe received an Underweight rating from Morgan Stanley with a price target slashed from $365 to $240
- Salesforce dropped to Equal-weight with its price target trimmed from $287 to $185
- Premarket trading saw Adobe decline approximately 4%, with Salesforce and Intuit experiencing similar drops
- Key concerns include AI monetization challenges, executive transitions, and weakening revenue momentum
- Wall Street consensus still favors Salesforce over Adobe for potential upside gains
In a bearish call on enterprise software heavyweights, Morgan Stanley revised its stance on multiple major technology names Tuesday, downgrading both Adobe and Salesforce while trimming price expectations significantly.
The downgrades triggered immediate market reactions. Adobe shares tumbled approximately 3.8% in premarket activity. Salesforce declined around 2.9%, with Intuit and Workday experiencing drops exceeding 4%.
Leading the research revisions, analyst Adam Wood downgraded Adobe to Underweight from its previous rating, simultaneously slashing the price objective to $240 from $365. Salesforce received an Equal-weight rating, with Wood reducing the target to $185 from $287.
Adobe’s AI Transition Raises Red Flags
Morgan Stanley’s primary hesitation with Adobe centers on execution timing. While the software giant continues advancing its innovation pipeline, these developments have yet to materialize into accelerating top-line expansion.
The company is implementing a freemium strategy while ramping up capital allocation toward artificial intelligence capabilities. Compounding this transition, Adobe is navigating simultaneous leadership changes at both the CEO and CFO levels, introducing additional execution risk.
Wood highlighted vulnerability in Adobe’s creative workflow segments, noting emerging AI-native competitors could potentially displace established solutions. Despite Adobe’s dominant position among creative professionals, the timeline to sustainable growth momentum appears increasingly extended.
The investment bank emphasized these concurrent strategic shifts create visibility challenges around when Adobe’s annual recurring revenue metrics will show material acceleration.
Salesforce Agentforce Needs Proof of Concept
While Morgan Stanley acknowledges potential in Salesforce’s artificial intelligence initiatives, particularly its Agentforce platform, Wood emphasized the need for tangible evidence these innovations will translate to subscription revenue growth.
Legacy business segments including Commerce and Tableau remain headwinds on consolidated growth rates. Without clear demonstration that Agentforce and emerging products can counterbalance these underperforming divisions, Wood anticipates constrained appreciation potential.
The revised Equal-weight rating suggests the shares may trade sideways absent acceleration in growth metrics, according to the analyst.
Workday received an Underweight designation with a $145 price objective. Morgan Stanley recognized Workday’s formidable competitive positioning within the software landscape but expressed skepticism that AI initiatives will generate substantial near-term revenue acceleration.
Intuit was initiated at Equal-weight with a $335 price target. Morgan Stanley characterized concerns that generative AI models will undermine Intuit’s tax and accounting franchises as excessive, though noted the company lags peers in AI preparedness.
Morgan Stanley identified Microsoft, Palo Alto Networks, CrowdStrike, Cloudflare, Datadog, ServiceNow, Snowflake, and Shopify as preferred investments within the software sector.
Across the broader analyst community, Salesforce maintains a Moderate Buy consensus with an average price objective of $239.94, suggesting approximately 38% upside potential. Adobe holds a Hold consensus rating, with the average target reaching $258.90, indicating roughly 10% appreciation potential.
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