UPDATE: Goldman Sachs Starts Adobe (ADBE) at Buy

Goldman Sachs analyst Kash Rangan initiates coverage on Adobe (NASDAQ: ADBE) with a Buy rating and a price target of $580.00.

The analyst comments "Our price target is based on a three-pronged, equally weighted valuation approach using a 10-year DCF, EV/Revenue and P/E. Our thesis is that Adobe is a market leading franchise with a dominant position and pricing power in its core Creative market, which is poised to grow its subscribers mid-teens driven by Digital Transformation initiatives. This leaves us with potentially several years of durable double digit revenue, earnings, and cash flow growth. Adobe’s franchise stands out as one with a loyal and growing customer base, which consider the brand to be the default tool of their profession despite several attempts by large and small competitors to change the game. Our F26 model has Adobe at ~54mn creative subscribers and generating $26/share in FCF. Adobe is not standing still despite forging a strong position as the industry standard in Creative and Document clouds but continues to innovate aggressively. While growth in the Digital Experience cloud (Digital Marketing) has been challenging of late, there are signs that a turnaround is well underway, which could accelerate overall top-line growth rate. Despite Adobe‘s high operating margin of 43%, we believe the longer-term margins can approach mid to high 40s. This coupled with double digit top line growth rate should drive several years of durable and low to mid-teens earnings growth rate."

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 $472.02 yesterday.

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