Adobe (NASDAQ:ADBE) has agreed to acquire online design startup Figma for $20 billion in a half cash half stock transaction. Shares of the company have reacted negatively to the development.
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The Adobe and Figma combine is expected to drive online collaborative creativity and productivity while also being able to tap a fast-growing market. Figma has gross margins of ~90%, a total addressable market of $16.5 billion by 2025, and net dollar retention of over 150%.
Upon closing, Figma Co-founder and CEO, Dylan Field will continue to lead Figma. Further the transaction is expected to close in 2023.
Separately, Adobe has announced revenue of $4.43 billion for the third quarter implying a 13% growth over the prior year. EPS at $3.40 handily beat expectations of $3.35.
The Chairman and CEO of Adobe Shantanu Narayen commented, “Fueled by our groundbreaking technology, track record of creating and leading categories, and consistent execution, Adobe delivered another record quarter.”
The company bought back 5.1 million shares during Q3 and its remaining performance obligations (RPO) stood at $14.11 billion at its end.
Looking ahead to Q4, Adobe sees total revenue at $4.52 billion. Digital media annualized recurring revenue is expected at $550 million of net new ARR. Further EPS is anticipated at ~$3.50.
What Is the Future of Adobe Stock?
Today, Citigroup’s Tyler Radke has reiterated a Hold rating on the stock alongside a $388 price target. Overall, the Street has a Moderate Buy consensus rating on Adobe.
The average analyst price target of $452.86 indicates a 21.89% potential upside for the stock.
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