The San Jose-based diversified software company has value beyond the creative cloud transformation, analysts said.
"That [value] appears to be well understood by investors at this point. Our thesis is rooted in the dominance of Adobe's creative tools and extends to include Adobe's unique advantage in digital marketing, as well as the virtuous relationship between these two businesses," analysts said.
Share of Adobe are down 0.23% to $70.28 in pre-market trading.
Separately, TheStreet Ratings team rates ADOBE SYSTEMS INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate ADOBE SYSTEMS INC (ADBE) a HOLD. The primary factors that have impacted our rating are mixed--some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and feeble growth in the company's earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- ADBE's revenue growth trails the industry average of 28.1%. Since the same quarter one year prior, revenues slightly increased by 1.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- ADBE's debt-to-equity ratio is very low at 0.22 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, ADBE has a quick ratio of 1.80, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for ADOBE SYSTEMS INC is currently very high, coming in at 90.98%. Regardless of ADBE's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ADBE's net profit margin of 4.44% is significantly lower than the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Software industry. The net income has significantly decreased by 46.2% when compared to the same quarter one year ago, falling from $83.00 million to $44.69 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Software industry and the overall market, ADOBE SYSTEMS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: ADBE Ratings Report