How Analysts View Adobe After Earnings

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Adobe Systems Inc. (NASDAQ: ADBE) released fiscal second-quarter financial results after the markets closed on Tuesday. Overall the results were positive and the company beat the street forecasts, but investors did not initially respond positively. As a result a few analysts poured into the stock, generally raising their price targets.

24/7 Wall St. has included some highlights from the earnings report, as well as a montage of what analysts said about the stock after the fact.

The company said it had $0.71 in earnings per share (EPS) on a record $1.4 billion in revenue. Consensus estimates from Thomson Reuters had called for $0.68 in EPS on revenue of $1.40 billion. In the same period of last year, Adobe posted EPS of $0.48 and $1.16 billion in revenue.

During the quarter, the company reported that deferred revenue grew to $1.68 billion.

The Digital Media segment revenue grew by 26% from last year to a record $943 million, with Creative revenue growing 37% to a record $755 million. Strong Creative Cloud and Document Cloud adoption helped drive Digital Media annualized recurring revenue to $3.41 billion exiting the quarter, a quarter-over-quarter increase of $285 million.

Adobe Marketing Cloud achieved record revenue of $385 million, which represents year-over-year growth of 18%.

The company issued guidance for the fiscal third-quarter: EPS in the range of $0.69 to $0.79 and revenue in the range of $1.42 billion to $1.47 billion. The consensus estimates call for $0.71 in EPS on $1.47 billion in revenue for the current quarter.

Shantanu Narayen, Adobe president and chief executive, commented:

Adobe’s cloud solutions are powering digital transformation at the world’s biggest brands, educational institutions and government agencies. Our record revenue reflects our market leadership and the exploding demand for digital experience solutions.

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

Record revenue with strong profit and cash flow highlight our second quarter results. Based on our first half performance and momentum, we’re on track to meet or exceed all of our annual fiscal year 2016 targets.

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After earnings were released, a few analysts weighed in on Adobe:

  • Goldman Sachs reiterated a Neutral rating with a $105 price target.
  • Sanford Bernstein reiterated an Outperform rating with a $114.
  • Credit Suisse reiterated a Neutral rating with a $105 price target.
  • Citigroup has a Buy rating with a $114 price target.
  • JPMorgan reiterated an Overweight rating with a $110 price target.
  • Deutsche Bank reiterated a Buy rating with a $120 price target.
  • RBC Capital reiterated an Outperform rating with a $104 price target.
  • Canaccord Genuity reiterated a Buy rating with a $110 price target.
  • Rosenblatt Securities has a Buy rating with a $120 price target.

Shares of Adobe were trading up 1.6% at $95.50 on Thursday, with a consensus analyst price target of $111.57 and a 52-week trading range of $71.27 to $100.56.