Key Takeaways
- Morgan Stanley slashed Adobe’s rating to Underweight, reducing the price target from $365 down to $240
- Salesforce received an Equal-weight downgrade with its price target trimmed from $287 to $185
- Adobe shares tumbled approximately 4% during premarket hours; Salesforce and Intuit experienced similar declines
- The investment bank highlighted concerns including artificial intelligence execution risks, executive transitions, and weakening growth momentum
- Wall Street consensus data suggests Salesforce offers stronger potential returns compared to Adobe at current valuations
On Tuesday, Morgan Stanley delivered a sobering assessment of several prominent enterprise software companies, downgrading both Adobe and Salesforce and triggering selloffs in premarket activity.
Shares of Adobe declined approximately 3.8% ahead of the opening bell. Salesforce retreated around 2.9%, with Intuit and Workday experiencing drops exceeding 4%.
Leading the research update, analyst Adam Wood downgraded Adobe to Underweight while establishing a fresh price target of $240—a substantial reduction from the previous $365 forecast. Salesforce also received a downgrade to Equal-weight, with its target price falling from $287 to $185.
Adobe Faces Mounting Headwinds, Morgan Stanley Warns
The primary issue Morgan Stanley identified with Adobe centers on execution timing. While the company continues to innovate, these initiatives haven’t yet yielded accelerated revenue expansion.
The creative software giant is transitioning toward a freemium business model while simultaneously ramping up investments in artificial intelligence capabilities. Compounding these strategic pivots, Adobe is navigating both chief executive and chief financial officer transitions, creating additional operational uncertainty.
Wood highlighted vulnerabilities in certain segments of Adobe’s creative workflow, which face competitive threats from emerging AI-native alternatives that could eventually displace traditional tools. Although Adobe maintains a dominant position among creative professionals, the timeline for achieving sustainable growth momentum has extended.
The investment firm emphasized that these converging transformations obscure visibility into when Adobe’s annual recurring revenue growth will demonstrate meaningful acceleration.
Salesforce Downgrade Reflects Wait-and-See Approach
Morgan Stanley continues to recognize potential in Salesforce’s artificial intelligence initiatives, particularly the Agentforce platform. However, Wood indicated that additional proof points are necessary to confirm these innovations will meaningfully boost subscription revenue.
Legacy business units, notably Commerce and Tableau, remain growth headwinds for the overall organization. Without clearer evidence that Agentforce and recent product launches can counterbalance these underperforming segments, Wood anticipates constrained appreciation potential.
The downgrade to Equal-weight reflects expectations that shares may trade within a narrow range barring significant growth reacceleration.
Workday similarly received an Underweight designation with a $145 price objective. While Morgan Stanley recognized Workday’s formidable competitive moat within the software landscape, the firm concluded that artificial intelligence initiatives are improbable to generate substantial near-term revenue expansion.
Intuit began coverage at Equal-weight with a $335 target. Morgan Stanley characterized concerns that large language model technology will fundamentally disrupt Intuit’s tax and accounting franchises as “exaggerated,” though the company ranked lower on preparedness metrics for emerging AI applications.
Morgan Stanley designated 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% appreciation potential. Adobe carries a Hold consensus rating, with analysts targeting $258.90 on average, representing roughly 10% upside from current levels.
