"Adobe reported solid 4Q14 results ... [and] continues to see solid traction for its products with net adds benefiting from single app purchases. We see ADBE continuing to outperform among our large-cap coverage, with valuation still attractive on a growth-adjusted basis," analysts said.
Additionally, Jefferies raised its price target today on the stock to $90 from $83 and reiterated its "buy" rating, emphasizing that the $800 million cash acquisition of Fotolia is "a tremendous opportunity to capture the approximately $5 billion plus market for stock images by closely coupling with ADBE's market leading creative tools."
This deal "epitomizes the Creative Cloud and opportunities to drive value/ARPU for existing subs and attract new ones," Jefferies said.
Credit Suisse remains "neutral" while raising its price target to $75 from $70, saying "although we are encouraged by the Creative Cloud's ability to effectively increase the annual revenue per user versus the prior perpetual licensing model, we believe much of this enthusiasm is captured in Adobe's current valuation."
"We will monitor Adobe's ability to attract new Creative users, increase Creative Cloud pricing, expand operating margins ahead of expectations, and continue to expand into the digital marketing market," Credit Suisse analysts added.
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 26.8%. 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.
- Compared to its closing price of one year ago, ADBE's share price has jumped by 30.29%, exceeding the performance of the broader market during that same time frame. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- 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