Building Portfolio Value With Adobe

Friday, June 18, 2021 | Thomas Hughes
Building Portfolio Value With Adobe

Adobe Is A Company Reborn 

Adobe (NASDAQ: ADBE) is one of those blue-chip, legacy tech companies that almost became irrelevant. Not to say that Adobe was ever really in danger of going out of business, only that it had reached the end of its visible growth cycle. Luckily for investors, the shift towards cloud-based services and then, later, the boost to digitization provided by the pandemic have reinvigorated this company and sent shares to new highs. Now, more than a year after the pandemic began, the company is still growing and guiding revenue above consensus estimates.

“Adobe had an outstanding second quarter as Creative Cloud, Document Cloud and Experience Cloud continue to transform work, learn and play in a digital-first world,” said Shantanu Narayen, president and CEO, Adobe. “Our innovative product roadmap and unparalleled leadership in creativity, digital documents and customer experience management position us for continued success in 2021 and beyond.”

Adobe Powers The Content Of The Internet

Adobe was perfectly positioned for the pandemic because it helps businesses, organizations, and individuals harness the power of the internet. Where microchips, hardware, and networking connect you to the Internet it's companies like Adobe that actually make it work in practical ways. Adobe's fiscal Q2 revenue proves the company's value to businesses, rising 22.7% over the last year to $3.84 billion and beating the consensus by 290 basis points. 

On a segment basis, the core digital media segment grew 25% over the last year with notable strength in the Document Cloud sub-segment. Document Cloud services revenue came in at $469 million representing a 30% growth over the past year while creative revenue grew by 24%.  The Digital Experience segment saw its revenue increased 21% over the last year with a 25% increase in Digital Experience Subscription revenue.

The company wasn’t able to drive significant margin expansion but the revenue strength did carry through to the bottom line. The GAAP EPS of $2.32 is up slightly from last year but beat the consensus by $0.22 while the adjusted EPS of $3.03 grew 24% over the last year and beat the consensus by $0.21.

Looking forward, the company is expecting to see business strength continue into the next quarter. The company is expecting a little more than 1% sequential revenue growth driven by double-digit year-over-year increases in both Digital Media and Digital Experience. This compares to the consensus estimate of a flat to slightly lower revenue and adjusted earnings. As for earnings, the company expects adjusted earnings to come in the range of $3 versus the consensus of $2.90.

The Analyst, Wow, Really Like Adobe

No fewer than 14 sell-side analysts have come out with positive commentary in the wake of the Q2 earnings release. Of them, only one raised the rating and that was from hold to Outperform by Oppenheimer, but they all raised their share price target. The other 13 already had a buy-equivalent rating on the stock. The broad consensus is near $605 or about 10% upside from current price action, but the consensus of the 14 fresh estimates has this stock trading closer to $650 or about an 18% upside and we think that estimate might be low.

Shares of adobe have been in a consolidation over the past several months and are breaking out with today's news. The breakout confirms the consolidation and the rally leading up to it giving us a target Closer to $750 that we think it might be reached by the end of the year. 

Building Portfolio Value With Adobe

Adobe is a part of the Entrepreneur Index, which tracks some of the largest publicly traded companies founded and run by entrepreneurs.

Should you invest $1,000 in Adobe right now?

Before you consider Adobe, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Adobe wasn't on the list.

While Adobe currently has a "Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The 5 Stocks Here


Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Adobe (ADBE)2.2$618.75-0.5%N/A53.62Buy$606.08
Compare These Stocks  Add These Stocks to My Watchlist 

MarketBeat - Stock Market News and Research Tools logo

MarketBeat empowers individual investors to make better trading decisions by providing real-time financial data and objective market analysis. Whether you’re looking for analyst ratings, corporate buybacks, dividends, earnings, economic reports, financials, insider trades, IPOs, SEC filings or stock splits, MarketBeat has the objective information you need to analyze any stock. Learn more about MarketBeat.

MarketBeat is accredited by the Better Business Bureau

© American Consumer News, LLC dba MarketBeat® 2010-2021. All rights reserved.
326 E 8th St #105, Sioux Falls, SD 57103 | U.S. Based Support Team at [email protected] | (844) 978-6257
MarketBeat does not provide personalized financial advice and does not issue recommendations or offers to buy stock or sell any security.

Our Accessibility Statement | Terms of Service | Do Not Sell My Information

© 2021 Market data provided is at least 10-minutes delayed and hosted by Barchart Solutions. Information is provided 'as-is' and solely for informational purposes, not for trading purposes or advice, and is delayed. To see all exchange delays and terms of use please see disclaimer. Fundamental company data provided by Zacks Investment Research.