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Wunderlich Starts Adobe At Hold, Notes 'Limited Upside Potential' And $90 Target


In a report published Tuesday, Wunderlich analyst Rob Breza initiated coverage of Adobe Systems Incorporated (NASDAQ: ADBE) with a Hold rating and $90 price target.

"Adobe remains dominant in its core creative market category with little to no true platform competition and, with the subscription model conversion essentially complete, we believe the company should begin to exhibit significant margin expansion while still investing in all three of its clouds including creative, marketing, and document," Breza explained.

However, the company reported lower-than-expected subscriber growth in Q1, while its stock offers limited upside potential and currently holds an in-line valuation.

The company addresses three large markets that are characterized by changing dynamics – the creative, document and marketing cloud segments, which are estimated to be worth $35 billion, $5 billion and $21 billion, respectively, with growth CAGRs of 15 percent, 10 percent and 18 percent, respectively.

According to the Wunderlich report, "Adobe's digital delivery platform strategy across its three different clouds creates a unique advantage allowing cross and upsell opportunities. Content creation in its simplest form can start in the creative cloud, be approved in the document cloud, and be utilized or analyzed and tracked in the marketing cloud."

Regarding the recently reported Q1 results, Adobe posted a strong quarter, while guiding to Q2 below expectations. The analyst believes that the Q2 guidance might lead to investor concern until there is better visibility into subscriber growth, going forward. The full year guidance, however, remained unchanged.

Latest Ratings for ADBE

Feb 2021WedbushMaintainsNeutral
Jan 2021Goldman SachsInitiates Coverage OnBuy
Dec 2020Credit SuisseMaintainsOutperform

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