Adobe Systems (ADBE) stock wobbles. Is weak FY19 outlook to blame?

10:18 am ET, 15 Dec 2018

Adobe Systems Incorporated (ADBE) shares are trading at $230, down -7% on Friday.  The company announced its quarterly earnings results on Thursday after the market close.  It came out with EPS of $1.83, missing the consensus estimate of $1.88 per share. 

Adobe updated its 2019 outlook to include its acquisition of Marketo.  It expects adjusted earnings of about $1.60 a share on revenue of about $2.54 billion for the first quarter and about $7.75 a share on revenue of about $11.15 billion for the year. Analysts had previously estimated higher earnings per share of $7.98 a share on revenue of $10.78 billion for the year, which is one of the reasons why the stock has tanked.

As the leader in digital media and digital marketing solutions, Adobe has done well. The stock had a good run this year: it generated a return of 40%. The company has a strong market position in the digital marketing business.

Investors are showing interest in the company because of its strong revenue growth. On the other hand, a few bearish investors worry about the rising competition in digital marketing. Last quarter’s revenue rose 25% to $2.29 billion and earnings per share came at $1.73 per share compared to $1.10 for the same period last year.

Adobe achieved record revenue of greater than $9 billion in fiscal 2018.  It made significant investments across its product portfolio, entered new markets, and made strategic acquisitions such as Marketo.  

What is the sentiment towards the ADBE stock? Our technical analysis shows that:

  • The stock short-term sentiment (next 30 days) is trending positive;
  • The mid-term sentiment (3-6 months) is trending positive;
  • The long-term sentiment (9-12 months) is trending positive. 

Over the last month, Adobe Systems Incorporated (ADBE) returned +2.58%.

Adobe Systems Incorporated (ADBE) average analyst price target ($292.19) is 18.86% above its current price ($245.82).

For the latest price and information on Adobe Systems Incorporated, please visit Finstead and search for "ADBE price" or "ADBE news".

Adobe Systems (ADBE) stock: still riding high

8:37 am ET, 13 Sep 2018

Adobe Systems Incorporated (ADBE) shares are trading at $267.56, prior to the earnings later today. What's driving ADBE stock price? What's ADBE stock price forecast, and what should investors know about the stock?

Adobe shares have gained over 71% in the past year. The company has been able to beat its successive earnings estimates. It has the made the shift from on-premise software to cloud at the right time. The digital media segment is the focus area of the company, generating high growth.  

The company’s second-quarter revenue grew 24% to $2.2 billion and earnings per share came at $1.66.  The digital media segment revenue grew 28% to $1.55 billion. Some investors are very bullish about the stock, as they believe the company will come up with yet another strong earnings report.  Others are looking to cash their profits after a good run.

The next earnings report will be released after market close on September 13, 2018. Investors will be looking for more details about the Magento deal on the earnings call. The median analyst revenue estimate is $2.25 billion, representing a year-over-year increase of 22% and EPS estimate is $1.69, up 54% from the previous year.

What is the sentiment towards the ADBE stock? Our technical analysis shows that:

  • The stock short-term sentiment (next 30 days) is trending positive;
  • The mid-term sentiment (3-6 months) is trending positive;
  • The long-term sentiment (9-12 months) is trending positive.

Adobe Systems Incorporated (ADBE) forward P/E ratio is 34.22, and it’s high compared to its industry peers’ P/E ratios.

Adobe Systems Incorporated (ADBE) average analyst price target ($271.27) is 5.12% above its current price ($258.05).

For the latest price and information on Adobe Systems Incorporated, please visit Finstead and search for "ADBE price" or "ADBE news".

Adobe Systems Incorporated (ADBE) Stock Guide

Updated at: 10:04 am ET, 17 Sep 2020

Before we start: if you're looking for ADBE stock price, you can quickly find it out by visiting Finny and typing "ADBE quote". If you're looking for a quick scoop on ADBE stock (chart, price target, market cap, news and buy or sell analysis), go to Finny and look for "ADBE". You'll get all this info in one place. Or you can just type "ADBE news" to get the latest stock news.

Looking to buy or sell Adobe Systems Incorporated (ADBE)? Interested in getting the full scoop on ADBE, including earnings and dividends, stock forecast, buy or sell analysis and key stats? If so, you came to the right place.

In this ADBE stock guide, we'll address key questions about ADBE, above and beyond what you can find on Yahoo Finance, Zacks, MarketWatch or Morningstar.

Here is what you'll be able to find in this guide:

Earnings and Dividends: earnings, earnings date, dividend rate and dividend yield;
Analyst Predictions: stock forecast and analyst ratings;
Analysis: Finny Score and buy or sell analysis;
Key Stats: revenue, market cap, revenue growth, profit margin, P/E ratio, P/B ratio, industry, sector, and number of employees.

And here is the list of questions we'll answer:
1. What are ADBE earnings?
2. What is ADBE stock forecast (i.e., prediction)?
3. ADBE buy or sell? What is ADBE Finny Score?
4. What are the reasons to buy ADBE? Why should I buy ADBE stock?
5. What are the reasons to sell ADBE? Why should I sell ADBE stock?
6. What are ADBE key stats: revenue, market cap, revenue growth, profit margin, P/E ratio, P/B ratio industry, sector, and number of employees?

So let's start. Scroll down to the question that interests you the most.

Earnings and Dividends

1. What are ADBE earnings?

ADBE trailing 12-month earnings per share (EPS) is $7.58.

Analyst Predictions

2. What is ADBE stock forecast (i.e., prediction)?

Based on ADBE analyst price targets, ADBE stock forecast is $445.09 (for a year from now). That means the average analyst price target for ADBE stock is $445.09. The prediction is based on 31 analyst estimates.

The low price target for ADBE is $375.00, while the high price target is $575.00.

ADBE analyst rating is Buy.

Analysis

3. ADBE buy or sell? What is ADBE Finny Score?

#{finnyScore:50}Our quantitative analysis shows 4 reasons to buy and 4 reasons to sell ADBE, resulting in Finny Score of 50.

4. What are the reasons to buy ADBE? Why should I buy ADBE stock?

Here are the reasons to buy ADBE stock:

  • Adobe's products are the industry standard for creative professionals, creating a network effect and high switching costs.
  • Microsoft discontinued its Expression Studio, a direct competitor to Adobe's Creative Suite, after seven years on the market.
  • The subscription model for creative cloud should go a long way to eliminating price sensitivity for potential new users, providing a boost for growth.
  • The company's Creative Cloud package of software tools added more subscribers, which drove revenue. Also, its digital media segment revenue increased year over year. Moreover, management provided a strong guidance for the upcoming quarter due to higher demand for its Creative and Marketing Cloud products.
  • Adobe changed its business model from licensing to a cloud-based subscription model. The company moved its market-leading graphic design and productivity offerings to the cloud with the launch of Creative Cloud. Creative Cloud allows consumers to pay a monthly fee to subscribe to various Creative Suite applications like Photoshop, Illustrator, Dreamweaver and others.
  • Adobe continues to be the market leader in the Digital Media space. The company provides one of the best solutions in most categories of digital media design and publishing, including Internet and video. In fiscal 2017, total Digital Media ARR (Annualized recurring revenue), the key cloud performance measure, grew by $1.24 billion.
  • Acrobat is one of the company’s most successful product lines with a huge installed base of satisfied customers. Through Acrobat.com, the company offers a set of a cloud-based document and collaboration subscription services which include PDF creation, centralized online file sharing and contract signing solutions. There are currently many drivers of the Acrobat business.
  • Adobe entered the digital marketing space with the acquisition of Omniture. This is an area where corporate spending is on the rise. A number of trends are spurring this trend, including the increased adoption of cloud computing, social media and mobile devices, as well as the emergence of big data analytics.
  • Using its new cloud-based platform, Adobe is also diversifying into digital marketing services, offering data mining services, which help businesses to measure page views, purchases and social media sites. Adobe Marketing Cloud enables marketers to deliver personalized web experiences across multiple devices, manage multichannel campaigns and optimize media monetization. These services help businesses streamline marketing and products for targeted consumer groups, including chief marketing officers, chief revenue officers, advertising agencies, publishing executives and digital marketers.
  • ADBE quarterly revenue growth was 14.00%, higher than the industry and sector average revenue growth (1.11% and 0.89%, respectively). See ADBE revenue growth chart.
  • ADBE profitability is improving. The YoY profit margin change was 5.49 percentage points. See ADBE profitability chart.
  • ADBE average analyst rating is Buy. See ADBE analyst rating chart.
  • ADBE cash to debt ratio is 0.93, higher than the average industry (0.16) and sector (0.17) cash to debt ratio. See ADBE cash to debt chart.

5. What are the reasons to sell ADBE? Why should I sell ADBE stock?

Let's look at the reasons to sell ADBE stock (i.e., the bear case):

  • A large number of legacy Creative Suite users have yet to migrate to Creative Cloud, a pool of customers Adobe is counting on for near- to medium-term growth.
  • Competition for Adobe’s marketing solutions will remain intense for the foreseeable future, with heavy hitters such as Salesforce.com, Oracle, and IBM jockeying for position.
  • Competition at the low end of the creative market will maintain pressure on Adobe to innovate, even if a full-feature competitive solution never materializes.
  • The dynamics of the business are changing rapidly as a result of the transition to the subscription model. The company is receiving lower upfront fees. Also, with the new model, the switching costs have gone down so it becomes easier for customers to switch to competing platforms.
  • Also, lower end-market demand could impact earnings in the near term. We believe that this is the result of weak global economic conditions, the unwillingness of the user to spend on the modified Acrobat software and softness in the core computing market. The company’s software runs on personal computers and server-based computers, as well as on smartphones, tablets and other devices.
  • Adobe has significant exposure to Europe, with the Europe, the Middle East and Africa (EMEA) region contributing around 28% of sales in the fiscal year 2017. Given the currency headwinds faced by U.S. companies operating in Europe, 2018 results will continue to be impacted.
  • Overdependence on a few products. While Adobe does have a presence in other areas and recent results have been encouraging, more than half the revenue continues to come from the Creative Cloud and Acrobat product lines. Therefore, softness at customers and/or success rates of new platforms have a significant impact on results.
  • ADBE forward P/E ratio is 47.52, which is high compared to its industry peers’ P/E ratios. See ADBE forward P/E ratio chart.
  • ADBE Price/Sales ratio is 21.02, which is high compared to its industry peers’ P/S ratios. See ADBE forward Price/Sales ratio chart.
  • ADBE average analyst price target ($445.09) is below its current price ($471.13). See ADBE price target chart.
  • ADBE Enterprise Value/Revenue multiple is 20.47, which is high compared to its industry peers’ Enterprise Value/Revenue multiples. See ADBE Enterprise Value/Revenue chart.

Key Stats

6. What are ADBE key stats : revenue, market cap, revenue growth, profit margin, P/E ratio, P/B ratio industry, sector, and number of employees?

Let's look at the key statistics for ADBE:

Metrics ADBE
Price $488.24
Average Price Target / Upside $445.09 / -8.84%
Average Analyst Rating Buy
Forward Dividend Yield 0.00%
Industry Software - Application
Sector Technology
Number of Employees 21,357
Market Cap $253.24B
Forward P/E Ratio 47.52
Price/Book Ratio 21.02
Revenue (TTM) $12.05B
YoY Quarterly Revenue Growth 14.00%
Profit Margin 30.71%

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