5 Adobe Analysts React To Earnings Beat, Guidance Miss, Figma Acquisition

Zinger Key Points
  • Adobe reported mixed earnings and announced a $20 billion buyout of Figma.
  • "We believe part of the motivation for the deal was defensive," one analyst said.
5 Adobe Analysts React To Earnings Beat, Guidance Miss, Figma Acquisition

Adobe Inc ADBE shares traded lower by another 4.5% on Friday after the stock dropped 17% on Thursday, its worst day since 2010.

On Thursday, Adobe reported fiscal third-quarter adjusted EPS of $3.40, exceeding consensus analyst estimates of $3.33. Quarterly revenue was $4.43 billion, in-line with analyst estimates. Revenue was up 13% from a year ago.

Adobe also announced a $20 billion buyout of design software company Figma. Adobe said it planned to integrate features from its other products, such as illustration, photography and video technology into Figma’s platform.

Looking ahead, Adobe guided for fiscal fourth-quarter revenue of $4.52 billion, missing analyst estimates of $4.6 billion.

Related Link: 2 Match Group Analysts On Q2 Earnings Miss: 'Product Execution Issues At Tinder'

Large Figma Price Tag: Mizuho analyst Gregg Moskowitz said the Figma acquisition is strategically sound, but it comes at a heavy cost.

"Figma also comes at a hefty purchase price, and we believe part of the motivation for the deal was defensive," Moskowitz wrote.

JMP analyst Patrick Walravens said Adobe's motivation to buy Figma may stem from past mistakes.

"Adobe has been competing with two disruptive startups, Figma and Canva, and while Adobe let Canva get away from it, as Canva generated over $1B in ARR in 2021, the company seems determined not to make the same mistake with Figma," Walravens wrote.

Morgan Stanley analyst Keith Weiss said the Figma deal has likely increased investor concerns over Adobe's growth trajectory and margins.

"While we agree with management's view that Figma is a differentiated, high-quality asset gaining significant traction in the market, the high-priced (~50xFY22 ARR) take out of an emerging competitor stoked latent investor concerns around organic growth and the near-term dilutive impact to margin," Weiss wrote.

Related Link: 6 Advanced Micro Devices Analysts React To Earnings Beat, Guidance Miss, Market Share Gains

Solid Underlying Numbers: RBC Capital Markets analyst Matthew Swanson said Adobe's quarter was solid and its net-new digital media annual recurring revenue numbers were strong.

"We feel results and a more conservative guide were in-line with what investors were looking for, but the pending acquisition of Figma, and more specifically the price, dominated sentiment and will continue to do so in the near-term," Swanson wrote.

Piper Sandler analyst Brent Bracelin said Adobe is dealing with significant foreign exchange headwinds.

"While we come away bullish on the intermediate to long-term prospects of cross-selling Figma into a much broader base of Adobe customers, the price tag of $20B or roughly 50x CY22E ARR implies an even steeper premium than the $27B Salesforce-Slack combination," Bracelin wrote.

Ratings And Price Targets:

  • Piper Sandler has an Overweight rating and a $358 target.
  • Morgan Stanley has an Equal-Weight rating and a $337 target.
  • RBC Capital Markets has an Outperform rating and a $425 target.
  • Mizuho has a Neutral rating and a $360 target.
  • JMP has a Market Perform rating.

 

 

Photo: Shutterstock

Posted In: Brent BracelinGregg MoskowitzJMPKeith WeissMatthew SwansonmizuhoMorgan StanleyPiper SandlerRBC Capital MarketsAnalyst ColorEarningsNewsPrice TargetAnalyst Ratings