Adobe Had A 'Healthy' Q2 Beat

Bernstein analysts believe Abode Systems Incorporated ADBE had a healthy beat in the second quarter. The brokerage has an Outperform rating on shares and boosted the price target to $114 from $113.

The analysts think Abode is not only moving its existing customers, who historically purchased licensed Creative software, to subscription -- it is also attracting new customers through subscription revenue and new offerings.

According to the analysts, the company is now starting to boost the monetization of its subscribers as seen this quarter in the improvement in ARPU (Average Revenue per User) for Creative Cloud ETLAs.

Bernstein said in a note,"The company has also moved virtually all of their Digital Marketing license revenue to subscription while growing their Digital Marketing revenue. The full value of this will be seen as deferred revenue and unbilled backlog, which is growing 30%, converts into revenue."

The brokerage also liked the way it managed costs to drive continuing margin improvements. The analysts are confident that Adobe's margins would continue to enhance to help drive earnings growth and throw off more cash and more return of cash to investors.

The analysts also think investors were looking at the guidance for the next quarter and the 7 percent year-over-year growth in Digital Marketing as an issue. However, they believe  it was in line with their yearly outlook and due to big license sales in the third quarter of the last year.

On Wednesday, the stock traded 4.74 percent down.