Morgan Stanley issued a cautious take on several major software stocks Tuesday, downgrading Adobe and Salesforce and sending their shares lower in premarket trading.
Adobe dropped around 3.8% before the market opened. Salesforce fell roughly 2.9%, while Intuit and Workday also slid more than 4%.
Analyst Adam Wood led the coverage changes, cutting Adobe to Underweight with a new price target of $240, down from $365. He also downgraded Salesforce to Equal-weight, dropping its target from $287 to $185.
Morgan Stanley’s main concern with Adobe is timing. The company is innovating, but those efforts have not yet translated into faster revenue growth.
Adobe is shifting to a freemium pricing model and increasing spending on AI tools. At the same time, it is going through both a CEO and CFO change, which adds uncertainty.
Wood flagged that parts of Adobe’s creative workflow are at risk from AI-native tools that could replace them. While Adobe’s core creative professional business still holds a strong position, the path to durable growth is getting longer.
The bank said these overlapping transitions make it hard to see when Adobe’s annual recurring revenue will accelerate in a meaningful way.
Morgan Stanley still sees promise in Salesforce’s AI strategy, especially its Agentforce platform. But Wood said he needs more evidence that these tools will drive subscription revenue higher.
Older parts of the business, including Commerce and Tableau, continue to drag on overall growth. Until Agentforce and newer products clearly offset those weaker areas, Wood sees limited upside.
The stock was cut to Equal-weight and could stay range-bound unless growth picks up, he said.
Workday also received an Underweight rating with a $145 price target. Morgan Stanley acknowledged Workday has one of the strongest competitive positions in software but said its AI efforts are unlikely to drive meaningful near-term growth.
Intuit was started at Equal-weight with a $335 price target. Morgan Stanley said fears that large language models will disrupt Intuit’s tax and accounting business are “overdone,” but the company ranked lower on readiness for the next phase of AI.
Morgan Stanley named Microsoft, Palo Alto Networks, CrowdStrike, Cloudflare, Datadog, ServiceNow, Snowflake, and Shopify as its top picks in the sector.
Among Wall Street analysts broadly, Salesforce carries a Moderate Buy consensus rating with an average price target of $239.94, implying around 38% upside. Adobe holds a Hold rating, with an average target of $258.90, implying about 10% upside.
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