Adobe Inc. (ADBE), a provider of digital marketing and media solutions, posted better-than-expected third-quarter results backed by continued momentum across all segments. However, shares fell 4.1% in the extended trading session on September 21.
The company reported earnings of $3.11 per share, up 21% year-over-year, and beat analysts’ estimates of $3.01 per share. (See Adobe stock charts on TipRanks)
To add to that, revenue climbed 22% compared to the prior-year period to $3.94 billion and surpassed the Street’s estimate of $3.89 billion. Also, Adobe recorded remaining performance obligations (RPO) of $12.63 billion, up 22% year-over-year.
Commenting on the strong results, Shantanu Narayen, President and CEO of the company, said, “Adobe had another outstanding quarter as Creative Cloud, Document Cloud and Experience Cloud continue to transform storytelling, learning and conducting business in a digital-first world…Our talented employees, category-defining innovation, and product leadership uniquely position us for continued momentum and success.”
Based on the current macroeconomic conditions and expected year-end seasonal strength, Adobe guided for Q4 revenue of $4.07 billion compared to the consensus estimate of $4.04 billion.
Additionally, earnings for Q4 are expected to be around $3.18 per share, higher than the consensus estimate of $3.08 per share.
Recently, Wells Fargo analyst Michael Turrin initiated coverage of the stock with a Buy rating and a price target of $770 (19.2% upside potential).
Turrin calls Adobe “one of the crown jewels of software” in his research note and goes on to state that its total addressable market expansive digital tailwinds tied to experience and superior financial profile with 20%+ revenue growth and 40%+ free cash flow growth position the company as the best toolkit for creatives.
Moreover, the analyst said he expects a 20%+ earnings per share growth in the long run, along with other strong multiples, which leads him to recommend Adobe as a “long term core holding in any large-cap tech portfolio.”
Overall, the stock commands a Strong Buy consensus rating based on 12 Buys and 1 Hold. The average Adobe price target of $716.15 implies 10.9% upside potential to current levels. Shares have gained 32.7% over the past year.
Related News:
F5 Networks Inks Deal to Acquire Threat Stack
Twitter to Pay $800M to Settle 2016 Lawsuit
Brunswick Acquires SemahTronix; Shares Slip 2.6%
