Atlantic Equities Lifts Adobe To Overweight, Raises Target To $97

• Adobe Systems Incorporated ADBE shares have been rising steadily in 2015 and are up 14 percent year-to-date.
• Atlantic Equities’ Chris Hickey upgraded the rating on the company from Neutral to Overweight, while raising the price target from $80 to $97.
• Adobe’s new targets look realistic in view of the company’s progress in attracting new users to Creative Cloud, Hickey noted.

At its Analyst Day, Adobe outlined a plan to achieve high-teens revenue growth and margin expansion after the completion of the Cloud migration. The company highlighted new targets for FY15-18, aiming at a 20 percent CAGR for revenue, 30 percent for EPS and in the mid-20s for cash flow.

Terming the target as the first “clean” growth rate, analyst Chris Hickey noted that it was meaningfully higher than the previous Atlantic Equities estimate of low double-digit top- and bottom-line growth.

Hickey believes that the guidance is realistic in view of Adobe’s strong products, increasing investment in salesforce and significant pricing power within its base of full creative cloud customers.

Adobe has made tremendous progress in attracting new users to Creative Cloud, and its installed base of Creative Suite hold-outs represents a very large opportunity, the analyst said.

“This gives us more comfort that the company’s Digital Media targets are achievable. Furthermore, in the event that subscriber acquisition slows, the CC base is now close to the size where the company could use pricing to help achieve its financial targets,” Hickey wrote.