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Wells Fargo slashes Adobe stock price target over Figma deal

Yahoo Finance's Julie Hyman and Brad Smith discuss Wells Fargo's call on Adobe stock after the company announced it will take over Figma for $20 billion.

Video Transcript

[AUDIO LOGO]

[MUSIC PLAYING]

JULIE HYMAN: Getting you some Calls of the Day now. Our look at analysts' upgrades and downgrades making waves.

Let's start with Adobe. Wells Fargo the latest take aim at the company. The bank cutting Adobe after it announced last week it would buy collaboration software specialist Figma for $20 billion. This deal has gotten a resounding thumbs down from analysts ever since it happened. Wells Fargo is really just the latest here.

Edward Jones, Oppenheimer, Baird, Bank of America, Barclays have all downgraded the stock in response to this deal happening. Most of them are talking about the price being an issue. And the analyst over at Wells Fargo says, the product's strategic fit is clearly aligned. It's the price tag that is likely to lend credence to the bear case, at least for now. The size of the deal leaves no room for error. I mean, this--

[LAUGHTER]

Like it's rare that you see so much agreement among analysts in response to something like this.

BRAD SMITH: Right. The entire Street just shouting out, this ain't it Adobe.

JULIE HYMAN: Right.

BRAD SMITH: And I mean--

JULIE HYMAN: Or at least not this-- not at this price.

BRAD SMITH: Right. The total addressable market that Adobe was talking about, of $16 and 1/2 billion by 2025 that Figma has. Expected to add $200 million in net new annual recurring revenue this year, and perhaps surpass $400 million by the end of 2022 and getting out of 2022.

I think the entire Street is just kind of looking at this deal and knowing in this entire kind of enterprise or broader cloud or collaboration suite, this application tool segment, where there has been such a acquirer to growth strategy from all of the brands. And for how that has played itself out over years, it is remarkable for the Street to come together on a basis like this, to your point, and say, yeah, this wasn't the acquisition to do.

JULIE HYMAN: Yeah, and the stock continues to slide here today after announcing that last week.