11:52 AM EDT, 09/10/2024 (MT Newswires) -- Adobe (ADBE) could return to mid-teens growth compound annual growth rate in the medium to longer term due to the benefits stemming from generative artificial intelligence, Morgan Stanley said in an earnings preview Tuesday.

Morgan Stanley noted that Adobe covers the whole content life cycle with its digital media and experience collection. Tools like Adobe Asset Manager and the Adobe Experience Platform are essential for handling customer assets and data, which gives the company a distinct edge and enables it to use GenAI.

"Bottom-line, we believe Adobe remains an excellent software franchise, with a compelling innovation cycle ahead, which can even better monetize their large install base and expand their opportunity further," Morgan Stanley said.

The investment bank said the emergence of generative AI and a faster pace of new product launches "should provide a pivot point" for Creative Cloud net new annualized recurring revenue to return to growth in H2.

The firm noted that in eight of the last 10 quarters, Creative Cloud NNARR fell due to COVID-19 and pricing headwinds.

"With Digital Media NNARR guide already calling for seasonality in-line with the three-year average in H2, the rubber hits the road for Creative Cloud NNARR to inflect to growth and support an acceleration in [digital media] NNARR growth in H2," Morgan Stanley said.

Morgan Stanley maintained Adobe's overweight rating, with a price target of $660.

Adobe is set to release its fiscal Q3 results on Thursday.

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