Adobe Hits New Highs: Wall Street Debates If It's Time To Buy Or Sell

Adobe Systems Incorporated ADBE reported last Thursday its fiscal first quarter results which helped boost the stock to a new all-time high of $228.88 Friday.

With the stock now up more than 80 percent over the past year, are Wall Street analysts recommending investors cash in on their profits or add to their positions?

The Analysts

• Canaccord Genuity's Richard Davis maintains Adobe's stock rating at Buy, price target lifted from $222 to $245.
• Stifel's Tom Roderick maintains at Buy, price target lifted from $230 to $250.
• Morgan Stanley's Keith Weiss maintains at Equal-weight, price target lifted from $193 to $235.
• KeyBanc Capital Markets' Brent Bracelin maintains at Overweight, price target lifted from $225 to $252.
• BMO Capital Markets' Keith Bachman maintains at Outperform, price target lifted from $205 to $260.

Canaccord: Few Holes In This Story

Adobe's earnings report shows the company has a "firm grip" in the attractive digital content creation segment, Davis said in a note. To support its growth the company is likely to pursue another merger but still maintaining its status as the most disciplined buyer. Going back a year, there was some concern that Adobe would "look like Zendesk and scuffle" but the company is more akin to a ServiceNow company -- that is "bigger deals signed with greater regulatory."

Adobe's earnings makes it clear investors should own stocks of high quality companies like Adobe because they have a "strong tendency to deliver positive relative performance."

Stifel: Key Catalyst Ahead

Adobe continues to show a "high level of execution" in both the Digital Media and Digital Experience, Roderick said in a note. Encouragingly, a new line of products will support continued adoption by end users and also creates value with existing subscribers.

Meanwhile, Adobe's trend of delivering earnings reports that exceeds Wall Street's estimates will continue, especially ahead of Adobe Summit.

Morgan Stanley: Full Valuation

Adobe's earnings report marks an "impressive start" to fiscal 2018, but this shouldn't be a surprise as the company has been executive well for years, Weiss said in a note. Despite holding a "lot of confidence" in the business, a bullish stance on the stock can't be justified until management offers better clarity on where new subscribers coming from, what services attach rates look like, and the mechanics of the average revenue per user expansion.

KeyBanc: Better Positioned Cloud Player

Adobe stands out as "one of the better-positioned" cloud software leader, Bracelin said in a note. This is based on the company's potential to deliver 20 percent or more revenue growth and achieving margins of 40 percent or more.

In addition, the company could benefit from potential upside levers including price increases that kick in this month, foreign exchange tailwinds, continued enhancements in its AI platform Sensei, and an "untapped" share-gain potential in the Experience Cloud business where it holds less than a 5 percent market share in a $53 billion market.

BMO: 3 Reasons To Be Buyers

Adobe's status as a top pick since the beginning of 2017 remains unchanged, Bachman said in a note. Adobe continues to trade 2-3 times multiple points less than Salesforce CRM on a free cash flow basis; the company boasts a better margin improvement story compared to Salesforce over the coming years; and Adobe also has more potential to win in new markets than Salesforce, such as cloud services.