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Yahoo
4 days ago
- Business
- Yahoo
Is There Life After AI for Big Software?
It's not quite code-blooded murder, but shares of software companies have been beaten to a bloody pulp. Companies in the sector on both sides of the Atlantic were greeted with steep selloffs to begin the week, with one analyst's downgrade of Adobe — offered with the assessment that 'AI is eating software' — escalating jitters about the potential for artificial intelligence to do to Photoshop what Photoshop's digital tools did to the gouache paint, kneaded erasers, charcoal sticks, and airbrushes once commonly used to make photo alterations. READ ALSO: Can OpenAI Recover From Botched GPT-5 Rollout? and Amazon Cuts in Line at Online Grocery Checkout Rise of the Machine Helpers The domino effect kicked off Monday, after Melius Research analyst Ben Reitzes downgraded Adobe shares to sell from hold, slashing his target price from $400 to $310 in the process. The company's shares currently trade at $338. Reitzes wrote that software companies are at significant risk of losing out as AI becomes increasingly able to perform tasks automatically that humans currently use the firms' products to do. Real-world examples, he said, include 'the rise of [AI interface design firm] Figma, [AI graphic design firm] Canva, and [AI multimedia design firm] Runway and others who are taking market share as they become better capitalized.' He's not the first to note that AI agents could make traditional software interfaces obsolete. Researchers at Alix Partners earlier this year described what software companies are undergoing as a 'big squeeze,' noting they are faced with 'nimble, AI-native entrants that can replicate applications at a fraction of the cost' on one side and 'tech behemoths … pouring billions into the AI arms race' on the other. This week, investors' underlying jitters about the whole sector rose to the surface: On Monday, Adobe slipped 0.25%, Salesforce, 2.6%; Intuit, 5.5%; and Workday by 3.5%. Tuesday was Europe's turn, as Germany's SAP and Nemetschek fell 4% and 11%, respectively, France's Dassault Systèmes, 2.4%; and the UK's Sage by 4.7%. Despite these fears, Adobe beat earnings expectations in its latest quarter, raised its annual outlook, and has invested in building its own AI platform and offerings. It just hasn't been enough for investors. Notably, Adobe's remaining performance obligation (RPO), a key growth metric that tracks expected future revenue based on contracts, was flat at $19.7 billion in Q2, below expectations. Overall, Adobe shares have tumbled 23.9% this year, trailing both the broader S&P 500's 9.6% gain and the industry-specific iShares Expanded Tech-Software Sector ETF's advance of 8.3%. Mind you, it's not all analyst doom and gloom: Goldman Sachs estimates the integration of Adobe's generative AI-backed and brightly named Firefly app could add over $4 billion to the company's addressable market, and sees a bullish 70% upside for Adobe shares in the next year. Where it Hurts the Most: Under the greatest pressure are mid-sized software companies with fewer resources than Adobe's $21 billion in annual revenue. Alix Partners analyzed 122 publicly listed enterprise software companies with under $10 billion in revenue and found the number of high-growth companies fell to 39% in 2024 from 57% in 2023. They forecast only 27% will remain that way in 2025. 'We believe many mid-size enterprise software companies will face threats to their survival over the next 24 months,' the firm wrote in an April report. This post first appeared on The Daily Upside. To receive delivering razor sharp analysis and perspective on all things finance, economics, and markets, subscribe to our free The Daily Upside newsletter. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
CNBC
5 days ago
- Science
- CNBC
Microsoft's software business has a tailwind in AI, says Melius' Ben Reitzes
Ben Reitzes, Melius Research head of technology research, joins 'Closing Bell: Overtime' to discuss software AI's reality check, names he's likes in the space and more.
CNA
7 days ago
- Business
- CNA
Software stocks in Europe fall on concerns over AI pitfalls
MILAN :Software stocks in Europe fell sharply on Tuesday, with heavyweight SAP sliding more than 6 per cent amid concerns over the risks that artificial intelligence could pose to this part of the technology sector. SAP was briefly set for its biggest one-day drop since October 2020 and was last down 5.5 per cent. Meanwhile, Dassault Systemes, Sage and Nemetschek fell between 4 per cent and 10 per cent, making tech the worst-performing sector in Europe. One trader said the selloff mirrored declines among U.S. peers such as Adobe, Salesforce, Intuit and Workday on Monday, following a MarketWatch article that looked into the potential impact of AI on software companies, in particular. On Monday, Melius Research downgraded Adobe to sell.
Yahoo
11-08-2025
- Business
- Yahoo
Melius Research warns that things ‘can get worse for SaaS players like Adobe'
-- Melius Research downgraded Adobe (NASDAQ:ADBE) to Sell in a note Monday, warning that the shift toward artificial intelligence is triggering 'a multiple contraction phase in early innings' for leading SaaS companies. 'The world is coming around to the reality that 'AI is eating software,'' Melius wrote, noting that former darlings like Adobe, Atlassian (NASDAQ:TEAM), and Salesforce (NYSE:CRM) are each down more than 20% year-to-date. The firm sees parallels to the early 2000s, when cloud computing 'decimated' valuations for Dell (NYSE:DELL), HP (NYSE:HPQ), and IBM (NYSE:IBM). 'Just when you thought the coast was clear, their PE multiples kept going lower and lower—from the 20s to mid-single digits,' the analysts said. The threat for SaaS, Melius warned, is that 'almost anyone… can create an application so great that it can compete quickly and potently' thanks to AI, undermining the advantages of subscription-based models. AI is 'likely to kill seat growth' as companies consolidate roles in marketing, sales, creative, and HR departments. On Adobe specifically, Melius cited 'increased competition' from AI-first players like Figma, Canva, and Runway, as well as from large cloud providers such as Google (NASDAQ:GOOGL), which can 'easily create image and video generation tools that literally blow you away.' The firm expressed skepticism over Adobe's ability to monetize AI tools like Firefly, warning that customers may resist paying more when 'there are AI-first options from others.' Melius cut its FY26 and FY27 estimates, now forecasting 7% revenue growth to $25.1B in 2026 and just 4% growth to $26.0B in 2027. Its new $310 price target, based on ~13x FY27 EPS, reflects 'odds on downward revisions over the next 4–8 quarters' as 'pretty darn high.' Bottom line, the analysts said: 'It can get worse for SaaS players like Adobe… value [is] continuing to shift toward infrastructure winners like Microsoft (NASDAQ:MSFT) and Oracle (NYSE:ORCL).' Related articles Melius Research warns that things 'can get worse for SaaS players like Adobe' Risks Rising? Smart Money Dodged 46%+ Drawdowns on These High-Flying Names 7 Undervalued Stocks on the Rise With 50%+ Upside Potential Sign in to access your portfolio
Yahoo
01-08-2025
- Business
- Yahoo
Melius Research Initiates Coverage on Dutch Bros (BROS) with Buy Rating
Dutch Bros Inc. (NYSE:BROS) is one of the high growth stocks outside tech analysts are bullish on. Dutch Bros Inc. (NYSE:BROS) received a boost on Monday after Melius Research began coverage of the coffee chain with a Buy rating and a price target of $95. The stock was trading at $58.29 at the time of the announcement, suggesting a potential upside of over 60%. Melius praised Dutch Bros for its strong brand, rapid expansion strategy, and loyal customer base. Analysts noted the company's focus on drive-thru service and unique drink offerings as key strengths that help it stand out in a crowded market. 'Dutch Bros is positioned to become a major national player,' Melius wrote in a note to investors. At the current price, analysts see the stock as an attractive long-term growth opportunity. They highlighted that Dutch Bros is still in the early stages of expansion, especially outside the West Coast. The company's growth model, which mixes company-owned and franchised locations, allows it to scale while maintaining quality. Dutch Bros is a fast-growing drive-thru coffee chain known for its energetic culture and wide variety of drinks. While we acknowledge the potential of BROS as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. READ NEXT: and . Disclosure: None. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
