Morgan Stanley Issues Negative Rating on Adobe and Workday Stock

Morgan Stanley published a new analysis of the software sector on Tuesday, assigning Underweight ratings to Adobe and Workday shares while maintaining a positive assessment of the sector overall.

Following the report's publication, Adobe shares fell 3.8% in premarket trading, Workday fell 4.2%, Salesforce fell 2.9%, and Intuit fell 4.3%.

According to Morgan Stanley analysts' assessment, Adobe is undergoing several significant changes simultaneously — the company is transitioning to a freemium model, experiencing leadership changes, and substantially increasing its investments in AI. In the bank's view, these processes will slow the accelerated growth of annual recurring revenue (ARR).

It was also noted that some of Adobe's products face growing competition from new artificial intelligence solutions.

In Workday's case, Morgan Stanley believes that despite strong market positions, the company's AI initiatives will not provide significant revenue growth in the near term.

Salesforce and Intuit were assigned Equal-weight ratings by the bank. For Salesforce, the growth of Agentforce and Slack was assessed positively, though weak results from Commerce and Tableau are slowing overall growth rates.

In Intuit's case, analysts believe that investor concerns that large language models (LLM) will replace the company's tax and accounting products are exaggerated.