Buy Adobe (ADBE) on Weakness Post Q3, BofA/Merrill Lynch Says

BofA/Merrill Lynch analyst Kash Rangan reiterated a Buy rating and $80 SOTP target on Adobe (NASDAQ: ADBE) following results after the close. The analyst said the 5% sell-off after-hours is an overreaction and provides an opportunity to buy.

Rangan notes the stock sold off despite CC subs 502K versus the Street at 480-490K from lowered guidance of $60mn in Q4 Marketing Cloud revenue. He sees this as a opportunity given: "1) we think the shift of revenue is deliberate, as a greater % of Marketing Cloud bookings is falling under multi-year subscription agreements with ratable revrecognition vs. an upfront perpetual license than previously anticipated (75%/60%/45% for FY14/FY13/FY12), 2) bookings, the all too important metric, appears to be solid, with a 40% increase in the # of customers signing >$500K deals,and 3) ADBE maintained its FY14-16 25% revenue CAGR goal for Marketing Cloud, driven by strong on- and off-balance sheet backlog. Other metrics such as Creative ARR,EPS,and CFO were largely in-line to better than our est."

The firm raised FY 2014 EPS from $2.05 to $2.45 and FY 2015 EPS from $1.70 to $1.85.

For an analyst ratings summary and ratings history on Adobe click here. For more ratings news on Adobe click here.

Shares of Adobe closed at $70.73 yesterday.

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