UBS Raises Price Target on Adobe Systems (ADBE) to $122 Following Strong 2Q
UBS reiterated a Buy rating on Adobe Systems (NASDAQ: ADBE), and raised the price target to $122.00 (from $114.00), following the company's 2Q earnings report. ADBE reported revenue of $1,399M in the upper half of the company's guidance of $1,365-1,415M, but below the Street's $1,404M. EPS was reported at $0.71, beating the Street's $0.68, and guidance of $0.64-0.70.
Analyst Brent Thill commented, "Q1 was a tough one to match: a beat of ~$50M/0.05 to St. revs/EPS plus full yr raise for rev/EPS/ARR; mgmt. was ebullient after a record Q1; stock reacted by gaining 11% since then (vs. S&P500 +2%); and consensus became more optimistic. In contrast, Q2 was steady: rev above guide mid-pt but $5M below St.; ARR beat guide by $10M but missed St. by $7M; EPS did come in 1 cent above hi-end of guide as op mgn beat St. by 110bp. We don't think there are any smoking guns: FY guide was reiterated; Q2 strength was in the core Creative segment; and EPS & op mgn targets look conservative. One potential area of concern is Marketing Cloud: Q3 rev guide of +7% YoY (off tough comp) implies a big Q4 +34% YoY (though off an easy 6.6% comp), in order to hit reaffirmed FY16 goal of rev +20% & bookings +30%. Marketing Cloud has been choppy, and with CRM scooping up the top e-commerce asset, some investors are asking if ADBE needs another major Cloud to drive L-T growth. We still like ADBE's prospects (upside to $150 if EPS can hit $6 in FY19 and a muted 25x P/E is applied vs. current 32x NTM); but stock could trade sideways in the S-T after the Q1 euphoria was deflated by a more normal Q2, and investors look for excitement in the 2H."
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Shares of Adobe closed at $99.72 yesterday.