Adobe Systems Incorporated ADBE is set to release its fourth quarter fiscal 2015 results after markets close on Thursday. Ahead of the financial release, equities researchers at Deutsche Bank have raised its target price, as reported by MarketBeat.
Analysts raised the target price from $90.00 to $110.00 and maintained a "Buy" rating on the stock. Following the reports, the share price of the software company rose 2.37% to $91.72.
The analysts are of the opinion that Adobe should now be valued on a free cash flow multiple on higher visibility from recurring revenues. They also expect Adobe to report its results tomorrow on the higher end of its guidance for the fourth quarter of fiscal 2015.
Analysts polled by Zacks are divided on Adobe’s prospects. Of the 14 analysts covering the stock, 4 gave a hold rating while the rest have given a buy rating.
What is Driving Adobe Systems?
One of the largest software companies in the world, Adobe Systems’ massive customer base provides it with a distinct competitive edge. We believe that the company is being driven by continuous innovation in its Creative Cloud and Marketing Cloud businesses.
After the successful transition from traditional license to subscription-based services, Adobe wants to establish its presence in cloud-related software areas like documents and marketing. In this regard, the company recently introduced significant features and a number of updates for its Document Cloud (DC).
In October, the company announced a partnership with Dropbox Inc., a file backup service that offers cloud-based file management, storage systems and client software.
The integration of Dropbox into DC is aimed to make it easier for people and organizations to work with files on the go. With more than 18 billion PDF files stored in Dropbox, the alliance will enable Adobe Acrobat DC and Adobe Acrobat Reader users to easily access and work on files stored on Dropbox Basic, Pro and Business accounts from Adobe apps.
Additionally, Adobe Systems delivered an average positive earnings surprise of nearly 12.6% over the trailing four quarters. The company’s solid market position, its compelling product lines (including CS cloud initiative and digital media products), strong revenue growth, continued innovation and strong long-term growth potential position it favorably.
Even though the company's fundamentals look strong, in October, Adobe revised its fiscal 2016 guidance, which fell short of analysts’ expectations. Adobe cited a rising US dollar, a change in pricing and the effects of shifting its big software products to the cloud as the reasons for revising its 2016 forecast.
After having a successful transition from traditional license to subscription-based services, Adobe now wants to make place in cloud-related software in areas like documents and marketing. Adobe says that the shift to cloud would take over $100 million out of its revenues in 2016. Moreover, revenues will decrease by another $200 million or so due to currency fluctuations. All these pushed the company to revise its forecast
Adobe has a Zacks Rank #3 (Hold). Better-ranked stocks worth considering are NVIDIA Corporation NVDA, Stamps.com Inc. STMP and Travelport Worldwide Limited TVPT, all sporting a Zacks Rank #1 (Strong Buy).
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