How Analysts View Adobe After Earnings

Adobe Systems Inc. (NASDAQ: ADBE) released fiscal second-quarter earnings report after the markets closed on Thursday. Overall, investors had a very positive reaction to the report, but analysts had a somewhat mixed view on the stock. We have included some highlights from the earnings report as well as an analyst montage.

The company said it had $0.66 in earnings per share (EPS) on $1.38 billion in revenue. That compared to Thomson Reuters consensus estimates of $0.61 in EPS on revenue of $1.34 billion. In the same period of last year, Adobe posted EPS of $0.44 and $1.11 billion in revenue.

The Digital Media segment revenue grew by 33% year over year to a record $932 million, with Creative revenue growing 44% year over year to a record $733 million.

At the same time, strong Creative Cloud adoption drove Digital Media annualized recurring revenue to $3.13 billion exiting the quarter, an increase of $246 million.

Shantanu Narayen, president and CEO of Adobe, commented:

Every day, more brands, government agencies and educational institutions globally are choosing to base their digital strategies on Adobe’s content and data platforms. Our exceptional performance in Q1 is an indicator of the strong momentum we are seeing across our cloud businesses as we drive the experience economy.

Mark Garrett, Adobe executive vice president and chief financial officer, added:

We are pleased to report another record quarter with 25 percent year-over-year revenue growth. Strong Cloud adoption drove record Creative and Marketing Cloud revenue in Q1, and better-than-expected Digital Media ARR. Based on our strong Q1 results and business momentum, we are increasing our annual revenue and earnings targets for the year.

A few analysts weighed in on Adobe after the company reported earnings:

  • Credit Suisse has a Neutral rating but increased its price target to $85 from $70.
  • Citigroup has a Buy rating but lowered its price target to $92 from $114.
  • Sanford Bernstein has an Outperform rating and raised its price target slightly to $113 from $112.
  • Wunderlich has a Hold rating and raised its price target from $94 to $99.
  • FBR reiterated a Market Perform rating with a $100 price target.
  • RBC Capital has an Outperform rating and raised its price target to $104 from $101.
  • Goldman Sachs has a Neutral rating and lowered its price target to $92 from $100.
  • Dougherty has a Buy rating and raised its price target from $114 to $116.
  • Oppenheimer reiterated a Market Perform rating.

Shares of Adobe closed at $93.42 on Friday, with a consensus analyst price target of $102.70 and a 52-week trading range of $71.27 to $98.00.