Adobe Systems Incorporated Is Falling from Cloud 9

Updated on

By Carly Forster

Adobe Systems Incorporated (NASDAQ:ADBE) is a San Jose, California-based American multinational computer software company. The company’s tools and services allow their consumers to create digital content, distribute it across media, and measure it over time. On September 16th, Adobe announced its third quarter earnings report and its results, resulting in shares dropping almost 5% at $67.30.

During its Q3 results, Adobe reported $0.28 earnings per share on a non-GAAP basis, beating analysts’ consensus estimate of $0.26 by $0.02. During the same quarter last year, Adobe posted $0.32 earnings per share. The company had revenue of $1.005 billion for the quarter, compared to the consensus estimate of $1.02 billion. The software giant’s revenue for the quarter was up 1.0% on a year-over-year basis. On average, analysts expect that Adobe will post $1.23 earnings per share for the current fiscal year.

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A reason for the stock decrease on Tuesday could be due to Adobe’s abandonment of product license sales in favor of a subscription-only business model.

“Adoption of Creative Cloud and Adobe Marketing Cloud continues to accelerate,” said Shantanu Narayen, President and Chief Executive Officer, Adobe,  “We are the leader in both of these high-growth categories and have a rapidly growing pipeline, setting us up for a strong finish to the year in Q4.”

Shares of Adobe opened at $68.03 on Wednesday, September 17th. The software company has a 1-year high of $74.69 and a 1-year low of $48.87. The stock’s daily moving average is $68.12 and had a 50-day moving average of $70.80. The market cap for Adobe is $33.47 billion and its P/E ratio is 129.42.

On September 16th, RBC Capital analyst Ross MacMillian downgraded his rating for Adobe from Outperform to Sector perform. He reasoned that he has fears that the stock will be hurt by promotional pricing for its creative offerings and weaker-than expected results. MacMillan currently has an overall success rate of 84% in recommending stocks with a +22.5% average return. He has also rated Adobe Systems Incorporated (NASDAQ:ADBE) 18 times, earning an impressive 100% success rate on the stock.

Separately on September 16th, Sterne Agee analyst Robert Breza maintained a Buy rating for Adobe with an $85 price target. He noted, “In June, the company released the latest versions of its Photoshop, Illustrator and Dreamweaver in the so-called Creative Cloud. Those offerings should result in continued improvements in the products adoption as well as the retention of existing customers.” Breza currently has a 68% success rate in recommending stocks, earning him a +8.0% overall average return. He has also rated Adobe 9 times, earning a 40% success rate on the stock.

While one analyst has full confidence in Adobe’s new Creative Cloud, the other is not so sure. Whose recommendation do you trust?

To see more recommendations for Adobe Systems Incorporated (NASDAQ:ADBE), visit TipRanks today!

Carly Forster writes about stock market news. She can be reached at [email protected]

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