What Happened?
Shares of creative software giant Adobe (NASDAQ: ADBE) fell 3.7% in the morning session after analysts at Morgan Stanley downgraded their rating of the software firm.
The firm lowered its view on the stock to "equal-weight" from a prior "overweight" rating. Alongside the downgrade, Morgan Stanley also reduced its price target on the shares to $450 from $520. The change was prompted by concerns over slowing digital media annual recurring revenue. This figure represents the predictable income the company generated from its subscription-based software products, and a slowdown suggested worries about future growth.
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What Is The Market Telling Us
Adobe’s shares are not very volatile and have only had 5 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The previous big move we wrote about was 22 days ago when the stock dropped 3.7% on the news that the major indices continued to retreat amid profit-taking and renewed concerns about tariffs. Investors reacted to a federal court ruling that most of President Trump's global tariffs were illegal, raising uncertainty over trade policy and the fiscal impact of potential refunds. Rising Treasury yields added to the pressure, with the 10-year climbing above 4.2% and the 30-year nearing 5%, intensifying worries about stretched equity valuations. September's historically weak track record for stocks further dampened sentiment, leaving traders cautious ahead of the jobs report later in the week and the Federal Reserve's upcoming rate decision.
Adobe is down 20.9% since the beginning of the year, and at $348.63 per share, it is trading 37% below its 52-week high of $552.96 from December 2024. Investors who bought $1,000 worth of Adobe’s shares 5 years ago would now be looking at an investment worth $745.46.
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