Vivek Kumar
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Adobe Systems headquarters in Silicon Valley

The U.S. multinational computer software company Adobe is expected to report its fiscal second-quarter earnings of $2.81 per share, which represents year-over-year growth of about 15% from $2.45 per share seen in the same period a year ago.

The San Jose, California-based software company would post year-over-year revenue growth of over 19% to $3.73 billion. In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 7%.

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Adobe’s better-than-expected results, which will be announced on June 17, would help the stock hit new all-time highs. Adobe shares rose over 8% so far this year. The stock ended 1.07% higher at $541.26 on Friday.

Analyst Comments

“Upside to Digital Media net new ARR, positive checks in Digital Experience, and conservative operating margin forecasts for 2Q make us buyers into the print. Multiple rev growth engines and durable 20%+ EPS growth frames an attractive risk/reward for this solid secular growth franchise,” noted Keith Weiss, equity analyst at Morgan Stanley.

Adobe has leading market share in some of the most dynamic secular growth areas in software: creative design, dynamic media, and marketing automation. As such, we see the longer-term growth story for ADBE as better than most. With a large recurring rev base and operating margin improvements expected (as margin pressure from recent acquisitions comes to an end), we expect 20%+ EBIT CAGR from FY20-FY22 and believe this durable growth is not fully reflected in shares. Our $575 PT is based on 41x CY22e EPS of $13.96, which implies ~2.3x PEG on 16% EPS CAGR from FY20-FY22e.”


Adobe Stock Price Forecast

Twenty analysts who offered stock ratings for Adobe in the last three months forecast the average price in 12 months of $567.78 with a high forecast of $650.00 and a low forecast of $520.00.

The average price target represents 4.90% from the last price of $541.26. Of those 20 analysts, 17 rated “Buy”, three rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the stock price forecast of $575 with a high of $698 under a bull scenario and $438 under the worst-case scenario. The firm gave an “Overweight” rating on the software company’s stock.

Several other analysts have also updated their stock outlook. Wolfe Research set an “outperform” rating and a $650.00 target price for the company. The Goldman Sachs Group reiterated a “neutral” rating and issued a $523.00 price target.

Bank of America reiterated a “buy” rating and issued a $570.00 price target on shares. Credit Suisse issued an “outperform” rating and a $575.00 price target for the company. Jefferies raised the target price to $630 from $560.

ADBE +8% YTD trails SP50 13% and peer INTU 24%, despite strong fundamentals (FY21 JEFe rev +20% with OM +150bp to 44%). Our expert calls have been very positive, especially for DX,” noted Brent Thill, equity analyst at Jefferies.

“These point to a decent size FQ2 beat (JEFe 2%+), though stock may need more to overcome headwinds affecting growth & software sectors and CFO transition uncertainty. Improving momentum into 2H could help turn around cautious sentiment. ADBE remains a top 4 large-cap software pick.”

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