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- Shares of Adobe Systems Incorporated (NASDAQ: ADBE) have seen a sharp decline of more than 14 percent over the past week, with the steepest drop coming in on August 24.
- Baird’s Steven M. Ashley has, however, upgraded the rating on Adobe from Neutral to Outperform, while maintaining the price target at $85.
- Ashley believes that the recent correction in the stock market, along with the reacceleration in Adobe’s revenue and margin offer an attractive investment opportunity.
According to the Baird report, “We are now into the foothills of the revenue and margin reacceleration which should gain momentum going forward.”
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Ashley also believes that investors would benefit from the company’s shift to Subscription, while also expressing optimism regarding the shift to cloud services, which is expected to help the company penetrate into the Consumer and Education segments.
“The Adobe business model transition not only enhances customer lifetime value, it also expands the market by attracting new paying-customers, and perhaps most importantly is transformational from a customer point of view,” Ashley stated.
Following the launch of Adobe’s cloud-based mobile app for creative professionals in June 2014, the company has witnessed 30 million downloads for its nine new mobile apps as of March 17, including 5 million downloads by customers using the free version of CC>
“The mobile applications enhance the value proposition of the CC,” the Baird report said, since they “incentivize legacy CS6/CS5 customers to adopt CC,” help drive creative content to the cloud, attract new customers, enhance renewal rates, and have the potential to offer entry into the Consumer market in future.
In addition, Ashley expects Adobe’s ARPU to bottom in the near term, followed by expansion over the next 18 months.
This expansion is expected to be driven by the suspension of the 40 percent discount being offered when existing customers purchased the CC Suite, along with a potential pipeline of 810,000 CC subscribers added over the past year, who will need to renew their subscription over the next 12 months at a 67 percent premium.
Ashley also expects add-on sales of the newly launched Stock Photo service to drive ARPU expansion.
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.