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Bernstein Still Bullish On Adobe Following 'Clean' Q4, Conservative Guidance

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Bernstein Still Bullish On Adobe Following 'Clean' Q4, Conservative Guidance
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Bernstein remains Outperform-rated on Adobe Systems Incorporated (NASDAQ: ADBE) following the company’s better-than-expected fourth-quarter results, driven by strong revenues in digital media and digital marketing. However, Forex headwinds led the company to offer a conservative outlook for the first quarter and full year.

Print Review

Following is a gist of Adobe’s quarterly performance:

  • Q4 adjusted EPS $0.90 versus $0.86 estimate.
  • Q4 GAAP EPS $0.80, adjusted EPS $0.90 versus $0.86 estimate.
  • Q4 sales $1.61 billion vs. $1.59 billion estimate.
  • Q1 adjusted. EPS ~$0.87 versus $0.85 estimate.
  • Q1 sales ~$1.625 billion versus $1.65 billion estimate.
  • FY 2017 adjusted EPS ~$3.75 versus $3.83 estimate.
  • FY 2017 sales ~$6.95 billion versus $7.07 billion estimate.

“Adobe's high degree of operating leverage and ability to control costs enables the company to grow EPS in excess of already strong top-line growth,” analyst Mark Moerdler wrote in a note.

Adobe passed $4 billion in digital media ARR and sees the metric touch $5 billion by year-end 2017. The company also saw strong growth in digital marketing and forecasts revenue growth around 20 percent and bookings growth of 30 percent for the segment.

Analyst Commentary

San Jose, California-based Adobe is not only moving existing customers to subscription, but it is also capturing new customers and better monetizing them.

Moerdler highlighted that Adobe moved virtually all of its 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+ percent, converts into revenue,” Moerdler added.

Lastly, the analyst expects continued margin improvements from cost management, resulting in additional earnings growth and shareholder returns.

Shares of Adobe closed Thursday’s trading at $105.10. In the pre-market hours on Friday, they gained 1.85 percent to $107.04. Moerdler raised his price target by $1 to $124.

Latest Ratings for ADBE

DateFirmActionFromTo
Nov 2017KeyBancMaintainsOverweightOverweight
Nov 2017UBSInitiates Coverage OnBuy
Oct 2017ArgusMaintainsBuy

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Posted-In: Analyst Color Earnings Long Ideas News Guidance Price Target Reiteration Analyst Ratings Best of Benzinga

 

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