Why Adobe and Uber are newly named top stock picks at Deutsche Bank

By Emily Bary

Adobe is having success in AI and Uber is having success with its membership program

As the third quarter kicks off, analysts at Deutsche Bank are feeling especially upbeat about shares of Adobe Inc. and Uber Technologies Inc.

Those are the two high-profile technology names that were added to Deutsche Bank's Fresh Money list, which is reserved for top ideas. Within the technology sphere, they join fellow new entrant Entegris Inc. (ENTG), a materials supplier for the semiconductor sector, as well as returners Amazon.com Inc. (AMZN), AT&T Inc. (T), EverCommerce Inc. (EVCM), Five9 Inc. (FIVN) and Marvell Technology Inc. (MRVL).

There are 36 names in total on the Fresh Money list, across varying sectors.

"Adobe, like many others in Software, suffered a perception of disappointing relative to elevated AI expectations early this year," Deutsche Bank's Brad Zelnick wrote. But he saw positive signs in the company's latest results that he thinks will continue into the second half of the year.

Read: How Adobe quieted the doubters to send its stock cruising after earnings

For instance, Adobe (ADBE) displayed "burgeoning AI monetization across a range of customer types." The company's earnings showcased how enterprise clients are paying up for Creative Cloud versions that include premium artificial-intelligence features, and the company is doing a better job getting free users to ultimately pay up for Adobe services, according to Zelnick.

He sees the company as well positioned for a world in which AI is becoming more important. "With many businesses operating in a content-constrained world, Adobe's generative AI offering, Firefly, could both help to grow and unlock [total addressable market], making content creation more approachable and faster than ever," Zelnick wrote.

He has a buy rating and $650 target price on the stock, which is off 2.5% so far this year. It's ahead 1% in Tuesday morning action.

Meanwhile, fellow Deutsche Bank analyst Benjamin Black tabbed Uber shares (UBER), which he rates at buy with a $95 target.

"The underlying growth algorithm at Uber remains strong with driver supply and engagement continuing to support mobility growth, despite declining driver incentives," he wrote. "Drivers can consistently earn more on Uber with multiple products that have varying demand cycles, which we think creates a sustainable supply advantage with higher driver retention and engagement."

Overall, he sees "platform advantages" on both sides of Uber's business. And he's encouraged about uptake for the Uber One membership program, which incentivizes people to use Uber services more frequently.

While Uber shares are up 62% over the past year, they've lost 12% since the start of March. The stock is down 2% in Tuesday morning trading.

See also: Can Uber's stock hit $100? This analyst lays out the path.

-Emily Bary

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07-02-24 1140ET

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