UBS Reiterates Buy on Adobe Systems (ADBE)
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UBS reiterated a Buy rating and $130.00 price target on Adobe Systems (NASDAQ: ADBE). Initial 2017 guidance has revenues at ~$7Bn and EPS of ~$3.75, compared to the Street's 7.10Bn and 3.86 estimates.
Analyst Brent Thill commented, "We believe a successful business model transition needs to achieve 2 things: 1) a very high mix of recurring revs by changing pricing model and product consumption, and 2) renewed, sustainable high growth by expanding the market. Since detailing its playbook 5 years ago (Nov. '11 analyst day), ADBE achieved both: 1) recurring rev mix increased from 19% in FY11 to 83% in F3Q16 as Creative Cloud (CC) subs replaced product-cycle driven Creative Suite licenses; 2) a 20% rev CAGR for FY15-18 should lead to FY18 revs in excess of $8Bn, or nearly double FY11's $4.2Bn. An important element in sustaining this new & improved machine is constant innovation. This was in abundance in front of the creative audience at the keynote, and further evidenced in the significantly higher TAM of $64Bn by 2019, up from $48Bn (2018) given last year. ADBE remains one of our favourite large cap growth stories, with rev CAGR ~20%, EPS CAGR ~30%, and healthy & expanding op margins in the low 30s %."
Shares of Adobe closed at $105.89 yesterday.
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