Adobe Systems (ADBE) Stock Gaining on Price Target Increase

NEW YORK (TheStreet) -- Shares of Adobe Systems (ADBE) are rising 0.30% to 79.89 after the software company had its price target raised to $88 from $83 at RBC Capital which maintained its "sector perform" rating.

Potential catalysts to increase the price target are conviction of medium-term earnings power, improvements in ARPU (Average Revenue per User) and revenue growth acceleration in the second half of 2015, RBC Capital noted.

"We continue to believe that Adobe can earn $4.40 per share in 2017 fiscal year, and our estimate of over 10% growth in 2016 to 2017 could prove high in the scale of creative business," RBC Capital analysts said.

Adobe Systems offers products and services for professionals, marketers, application developers, enterprises and consumers for creating, managing, delivering, optimizing and engaging with content.

Separately, TheStreet Ratings team rates ADOBE SYSTEMS INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate ADOBE SYSTEMS INC (ADBE) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. 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, increase in net income, solid stock price performance and growth in earnings per share. We feel its strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 5.0%. Since the same quarter one year prior, revenues rose by 10.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Although ADBE's debt-to-equity ratio of 0.29 is very low, it is currently higher than that of the industry average. To add to this, ADBE has a quick ratio of 2.07, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Software industry. The net income increased by 80.4% when compared to the same quarter one year prior, rising from $47.05 million to $84.89 million.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • ADOBE SYSTEMS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ADOBE SYSTEMS INC reported lower earnings of $0.52 versus $0.57 in the prior year. This year, the market expects an improvement in earnings ($2.09 versus $0.52).
  • You can view the full analysis from the report here: ADBE Ratings Report

More from Markets

Apple and GE Switch Roles; Musk's Super Control of Tesla Explained -- ICYMI

Apple and GE Switch Roles; Musk's Super Control of Tesla Explained -- ICYMI

Trump May Be More to Blame For Higher Oil Prices Than OPEC

Trump May Be More to Blame For Higher Oil Prices Than OPEC

Dow Falls Over 200 Points as Apple's Slump Offsets Gains in General Electric

Dow Falls Over 200 Points as Apple's Slump Offsets Gains in General Electric

Week Ahead: Major Earnings on Tap as Wall Street Readies for Geopolitical Moves

Week Ahead: Major Earnings on Tap as Wall Street Readies for Geopolitical Moves

3 Hot Reads From TheStreet's Top Premium Columnists

3 Hot Reads From TheStreet's Top Premium Columnists