Adobe's Q2 Strength Keeps The Bull Thesis Intact

A strong Q2 earnings report pushed Credit Suisse analyst Michael Nemeroff to raise his price target to $160 on Adobe System Incorporated ADBE, as he maintained his Outperform rating.

“Adobe reported strong F2Q results with revenue, margins, EPS, and cash flows above Street expectations. The company delivered another solid quarter in Creative Cloud, as broad-based strength across all segments, continued ARPU uplift, healthy net-new subscriber adoption, and strong retention drove Creative Cloud ARR of $4.044B (+35% yr/yr), ahead of consensus and prior guide,” Nemeroff noted.

He went on to highlight Adobe’s Digital Media Annual Recurring Revenue exceeding consensus by nearly $50 million, and that this should create additional operating free cash flow. In a previous note, Nemeroff had said the cash flow upside was a reason behind his bullish theses.

Now he's focused on “expectations for continued momentum in its highly profitable Creative Cloud business that we expect will lead to stronger than expected operating cash flows over the next few years, at least.”

Nemeroff isn't the only one to raise his price target as Wunderlich and Deutsche Bank also maintained bullish thesis’ on Adobe. The stock was trading up over 4 percent at $146.85.

More details from the earnings report are available Benzinga Pro.

Adobe's Q2 Earnings: Expect Creative Cloud Unit To Drive Strength