Slowing Digital Marketing Trend Could Weigh On Adobe Stock

Adobe Systems Incorporated ADBE reported solid F2Q results, with an EPS beat. Oppenheimer’s Brian Schwartz maintained a Perform rating for the company, saying that the F3Q Digital Marketing growth guidance may disappoint investors.

Adobe’s F2Q results reflected healthy momentum in the leading business indicators and highlight the improving visibility in the company’s business model. Total revenue came in at $1.40B, representing 20 percent y/y growth, and was in-line with expectations. PF EPS was reported at $0.71, ahead of the consensus estimate by $0.03.

Adobe guided to total revenue of $1.42-1.47B, representing 17-20 percent growth. The midpoint is below the $1.47B consensus estimate, analyst Brian Schwartz pointed out.

Likely Pressure Stock

Schwartz mentioned the following as negatives for Adobe:

• F3Q Marketing Cloud growth guidance of ~7 percent y/y implies an ~11 point q/q decline in the growth optic
• Digital Media revenue and Print and Publishing revenue were marginally short of consensus expectations
• Management indicated that they would look out for acquisitions. This raises M&A risks, and could adversely impact the pace of operating margin expansion

“We maintain a Perform rating on a balanced near-term risk/reward profile, but think potential new investors will be disappointed in the F3Q Digital Marketing growth guidance, though the negative optic mostly reflects a tough y/y comparison,” the analyst added.