“Adobe is the best software play for the metaverse — its creative tools will enable the next generation of the internet,” said Jefferies tech analyst Brent Thill in a new research note Thursday.
Thill reiterated a Buy rating and $680 price target on Adobe. Shares of Adobe were relatively unchanged in pre-market trading Thursday. It closed down 7% at $514.43 on Wednesday.
The metaverse arguably burst into the public lexicon for the first time in 2021 as Facebook founder Mark Zuckerberg has hyped the digital world’s potential (and changed its holding company name to Meta in a show of support). Microsoft (Yahoo Finance’s 2021 Company of the Year) has also talked increasingly about the metaverse and how it will play in it moving forward.
In its simplest form, the metaverse is an online world that includes augmented reality, virtual reality, and 3D avatars. As this world takes form, how things are done stand to change dramatically.
CHINA – 2021/12/09: In this photo illustration the American multinational computer multimedia and creativity software company Adobe logo seen displayed on a smartphone with an economic stock exchange index graph in the background. (Photo Illustration by Budrul Chukrut/SOPA Images/LightRocket via Getty Images)
The Street expects a host of companies to cash in on the metaverse such as gaming bigwig Roblox and music maker Warner Music.
“A single metaverse could be more than a decade away, but as it evolves it has the potential to disrupt almost everything in human life that has not yet already been disrupted,” said Simon Powell, Thill’s colleague at Jefferies, in a recent note.
As for Adobe, investors will have to balance the potential for the metaverse with slowing growth at the software player.
Adobe posted a disappointing quarter and outlook several weeks ago. The stock is down 25% from its Nov. 25 high, technically putting it in a bear market.
“After disappointing Q4 earnings and FY22 guidance, digesting COVID impact may last through the first half of 2022,” acknowledged Thill.