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Adobe's Guidance Not Good Enough For A Premium Valuation

Adobe's Guidance Not Good Enough For A Premium Valuation
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Adobe Systems Incorporated (NASDAQ: ADBE) reported its FQ3:16 revenue and EPS ahead of the estimates and the consensus.

Credit Suisse’s Michael Nemeroff maintains a Neutral rating on the company, with a price target of $105.

FQ3 Results

Adobe Systems reported its total revenue for FQ3:16 at $1.46 billion, representing over 20 percent year-on-year growth and slightly ahead of the consensus and estimate.

The company reported its EPS for the quarter at $0.75, again ahead of the estimate and consensus.

Related Link: Citi Sees Adobe Numbers Continuing Higher

“FQ3 Digital Media ARR of $3.698 billion was relatively in line with consensus / guidance and perhaps better-than-feared after the modest ARR miss in FQ2, but still below the company's historical beat-and-raise cadence,” Nemeroff mentioned.


Adobe Systems guided to FQ4:16 revenue of $1.55-$1.60 billion, in line with the estimate and consensus, while the midpoint of the EPS guidance of $0.83–$0.89 was ahead of expectations.

The company also raised its F2016 revenue and EPS guidance to $5.80–$5.85 billion from $5.80 billion and from $2.80 to $2.94–$3.00, respectively.

Management reiterated its digital media ARR target of $4 billion exiting F2016, while reiterating its annual marketing cloud growth guidance of 20 percent for F2016, despite the FQ3 outperformance.

Premium Unjustified

“While we believe ADBE's FQ3 results and FQ4 guidance were generally good, just meeting expectations may not be enough for a large-cap software stock that trades at such a premium valuation, in our view,” Nemeroff stated.

At time of writing in Wednesday's pre-market session, Adobe was up 5.35 percent at $106.

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Latest Ratings for ADBE

Dec 2017Morgan StanleyMaintainsEqual-Weight
Dec 2017JP MorganDowngradesOverweightNeutral
Nov 2017KeyBancMaintainsOverweightOverweight

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Posted-In: Analyst Color Earnings News Guidance Reiteration Analyst Ratings Movers Tech


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