4 Adobe Stock Analysts On Q1 Results, 'Improving Digital Tailwinds'

Adobe ADBE reported first-quarter revenue of $3.91 billion on Tuesday, up 26% year-over-year.

Digital media revenue helped fuel the vibrant performance at $2.86 billion, a 32% year-over-year spike.

The company also generated $1.26 billion in net income for the quarter, or $2.61 per share, compared with net income of $955 million, or $1.98 a share, in the same quarter one year earlier.

The company’s adjusted net income was $3.14 per share.

Adobe also offered full-year guidance of $15.45 billion in revenue and adjusted earnings of $11.85 a share.

The quarterly earnings report also included the news that John Murphy, Adobe’s chief financial officer, will be retiring this year.

Piper Sandler On Adobe: Adobe has “the largest creative cloud and document cloud platform in the world,” Piper Sandler analyst Brent Bracelin said in a note. 

The analyst praised the company’s strong quarterly results as a triumph of “capitalizing on improving digital tailwinds in the midst of a global pandemic, especially with the Document Cloud business.”

Adobe’s recent $1.5-billion acquisition of Workfront, a work management platform for marketers, brought $38 million into the quarterly revenue stream after purchase accounting, he said. 

Although noting this acquisition and other growth investments “may temper growth relative to 2020,” Bracelin said “another record margin entering the year sets a favorable watermark for FY21 earning growth, which is expected to grow 17% y/y in FY21.”

RBC Capital Markets On Adobe: While the company’s overall viability is not back to pre-pandemic levels, it is benefiting from demand across its portfolio from small and medium business customers in the U.S and overseas, Matthew Hedberg, an analyst at RBC Capital Markets, said in a note. 

While expressing surprise that the fiscal year guidance was raised, the analyst said Adobe is “well-positioned to attract a high-quality replacement” for the departing Murphy.

“With digital transformations increasingly becoming a priority for companies, and digital content creation a long-term trend, we increase top and bottom line estimates,” he wrote.

Oppenheimer On Adobe: Brian Schwartz, managing director at Oppenheimer, also pointed out Murphy’s retirement and the raised guidance, adding that the guidance is “understated to de-risk the model for the next CFO.”

While noting Adobe’s publishing-and-advertising revenue was $13 million below consensus, the analyst said the business is being deemphasized.

“Adobe stands out from almost any group as the pioneering trailblazer of digital creative and marketing tools and services, and the company has transitioned and progressed into a verifiable cloud platform success story as it rides atop multiple product pillars of substantial scale, profits, and growth trajectory,” Schwartz wrote, adding that “Adobe is highly profitable, unlike most of the other names in our SaaS/Applications universe, and this characteristic provides a unique level of valuation support versus company peers.”

JMP On Adobe: The “tone of business appears to be good at Adobe,” analyst Patrick Walvarens said in a note. 

But Walvarens’ praise was somewhat muted compared to his peers. 

“We like Adobe's monopolistic position within the creative cloud, where it delivers essential solutions to an important demography of creators, but continue to be more circumspect around the Digital Experience segment, which includes a number of different acquisitions … which Adobe plans to leverage to create a unified marketing system of record and workflow solution that will bring Adobe into more competition with companies like Asana, Smartsheet, and Monday.com,” he wrote.

ADBE Ratings, Price Targets:  Piper Sandler maintained an Overweight rating on Adobe with a $570 price target. 

RBC maintained an Outperform and $575 price target. 

Oppenheimer maintained an Overweight and $550 price target.

JMP maintained a Market Perform rating. 

ADOBE Price Action: At last check, Adobe was trading down 1.74% at $452.19.