Analysts Will Have To Look Hard To Find Fault With Adobe's Q2 Results

Shares of Adobe Systems Incorporated ADBE gained more than 3 percent Wednesday after the company reported a top- and bottom-line beat in its second-quarter earnings report.

Deutsche Bank's Nandan Amladi felt the report was compelling enough to maintain a Buy rating on Adobe's stock with a price target boosted from $140 to $160 as there was "not much to quibble about."

Among the most encouraging aspects of the report was a the Creative and Marketing segments which helped sustain average revenue per user (ARPU) growth, Amladi said in a note. Management also cited an acceleration in the Stock business with new content providers and a "burgeoning" catalog which stands at 90 million assets.

Single-app downloads within the Video suite rose 49 percent from a year ago and a new Scan mobile app in the Acrobat franchise saw 750,000 downloads, the analyst added.

"This strategy of bringing new users into the franchise with an initial low friction/low price sale, then growing ARPU as they buy more, is tried and tested – and continues to work," the analyst wrote.

There were some concerning aspects in the report, Amladi noted. Specifically, organic growth ex-TubeMogul in the quarter was in the 18 to 20 percent range, which marks a deceleration from recent quarters. Also, expectations for a margin expansion in the bottom half of 2017 was "tamped down" given new hiring initiatives in Marketing.

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