JPMorgan Wanted More From Adobe

Adobe Systems Incorporated ADBE reported its 2Q16 results with the revenue and EPS mostly in line with expectations.

JPMorgan’s Sterling Auty maintains an Overweight rating on the company, with a price target of $110.

Elevated Expectations

Given that the stock appreciated 7 percent over the last three months, Auty believes that expectations going into the print were elevated.

“While results were not a blow out there was nothing that caused us concern and we think the company is on track to under promise and over deliver on full year results that were just raised last quarter,” the analyst mentioned.

Related Link: UBS Expects Continued Progress On Adobe's Key Metrics

2Q16 Results

The 2Q16 revenue and non-GAAP EPS came in at $1,399 million and $0.71 respectively. The EPS was ahead of the estimate and consensus, benefiting from continued operating leverage.

“We are in the sweet spot of seeing the operating leverage coming through the subscription transition and we believe looking forward it will be hard for Adobe to actually restrain margins to the corporate goal of ~35 percent,” Auty stated.

Creative Cloud AAR came in at $2,998 million, ahead of the estimate of $2,950 million, driven by successful adoption and retention across Adobe Systems’ customer segments.

Auty believes that while digital marketing growth remains on track, it would take until 4Q16 to “finally see the convergence in digital marketing revenue growth toward the ~30 percent expected bookings growth.”