Adobe Reports Strong Earnings - Analysts React
Javier Frausto & Kareem Winters
On Tuesday after the bell, Adobe (ADBE) reported its fiscal year 2020 earnings release. On the top line, revenues of $3.23 billion (+14% YoY) exceeded expectations of $3.20 billion. On the bottom line, adjusted earnings per share of $2.57 (+25% YoY) exceeded expectations of $2.41 per share.
Additionally, Adobe reported it’s Digital Experience revenue to be $838 million in Q3 2020. Subscription revenue grew 14% YoY.
On the release, CEO Shantanu Narayen stated: “We are confident that our leadership in the creative, document, and customer experience management categories will drive continued momentum in 2020 and beyond.” This was Adobe’s best Q3 in its history.
The company also provided guidance for Q4 2020, Adobe expects to see an increase of total revenue to be approximately $3.35b. Adobe also expects to see it’s digital media segment revenue climb ~18% from Q4 2019, net new annualized recurring revenue (ARR) is expected to be about $540 million, and non-GAAP EPS is expected to be ~$2.64 for Q4 2020.
CEO Shantanu Narayen also mentioned, “In our Digital Media business, we drove strong revenue growth in both Creative Cloud and Document Cloud in Q3, achieving $2.34 billion in revenue, representing 19% year-over-year growth.”
In response to the solid results, analysts at BMO Capital Markets reiterated their Outperform rating while raising their price target to $560 (from $535), based on 18-19x EV/FY2021E revenue. Analysts see the Cloud as well as digital media strength helping to support strong revenue growth and margins.
Meanwhile, analysts at JPMorgan seem to share the same optimism, as they also reiterated their own Overweight rating while raising Adobe’s price target to $550 (from $430), pointing to Cloud ARR, along with Digital media ARR, and Sign enterprise bookings.
Will we see some more records being broken in Adobe’s Q4 earnings after hitting revenue records? Let us know what you think in the comments below!
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