Analysts Mixed On Adobe Following Q3 Results, Outlook

Adobe Systems Incorporated ADBE's earning have served to polarize the analyst community. The company reported above-consensus adjusted earnings per share and revenues for the third quarter. Furthermore, its fourth-quarter earnings per share guidance is upbeat, with the company promising another record quarter.

Citi Raves

While noting that Adobe posted upside across most metrics, Citi noted that subscription revenue in digital media and digital marketing was supported by deferred revenue growth, suggesting 22 percent billings growth. The firm said its revenue and expenses estimate moves higher. Citi sees the third quarter results as supporting a bull case of strong upward bias to earnings per share and cash flow estimates.

Citi maintains its Buy rating and $117 price target on the shares of Adobe.

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Credit Suisse Guarded

Credit Suisse, while conceding that the results were great, said it believes the current premium valuation already reflects the existing growth trajectory. The firm is at a loss spotting near-term catalysts that could drive valuations further higher. Nevertheless, Credit Suisse raised its earnings per share and revenues estimates for 2016 and 2017.

Credit Suisse stays at Neutral and with a $105 price target on the shares of Adobe.

Morgan Stanley Skeptical

Just like its peers, Morgan Stanley too acknowledged the strength across metrics in the third quarter, with margin singled out as stronger. However, the firm construes the management commentary as suggesting tempered longer-term margin expansion. Like Credit Suisse, Morgan Stanley also believes the strong performance is priced in.

Morgan Stanley's rating for the shares of Adobe is Equal Weight, compared to its Attractive industry view, and its price target for the stock is $110.

Goldman Touts EPS Guidance As Highlight

Goldman Sachs highlighted on the margin's role in the third quarter outperformance. The firm was more impressed by the upward revision to the company's 2016 non-GAAP earnings per share, which comes despite a modest raising of revenue guidance. The firm also noted that the company cautioned about higher operating expenditure growth through 2018 on increase in spend on sales staff and marketing.

Premising on its estimate revision, Goldman raised its 12-month price target on the shares of Adobe to $112 from $104, while maintaining its Neutral rating.

At time of writing, shares of Adobe were up 6.37 percent on the day at $107.03.

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