Adobe falls as Melius downgrades amid generative AI concerns (ADBE)

Adobe (NASDAQ:ADBE) was in focus on Monday as investment firm Melius downgraded the Photoshop maker, citing issues that the broader enterprise software industry is having with artificial intelligence.

Shares fell 1.1% in premarket trading.

The issues that the enterprise software industry is dealing with are akin to when on-premise hardware companies were negatively impacted by cloud computing, Melius analyst Ben Reitzes said, adding that “these things tend to last longer than you think.” Reitzed lowered his rating on Adobe to Hold from Buy with a $510 price target.

With coding tools making it easier for smaller, AI first competitors to pop up (a trend that’s likely only to accelerate), the major cloud platforms making deployment easier than ever and most software-as-a-service companies having raised prices significantly over the years, it’s likely that it will be “harder to charge extra for AI,” Reitzes said. Additionally, the rise of AI-centric productivity could negatively impact the seat model and force a business model transition to the entire industry.

Lastly, AI is seen as a “disruptor” to traditional databases due to the rise of unstructured data, both in terms of importance and usability, Reitzed said.

Analysts are largely bullish on Adobe (ADBE). It has a HOLD rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha’s quant system, which consistently beats the market, rates ADBE a BUY.