Analysts Still Bullish On Adobe Despite Bookings Miss

Shares of Adobe Inc ADBE continued to fall on Wednesday after missing expectations on subscription bookings and lowering guidance for its Digital Experience business.

Several sell-side analysts kept Buy recommendations on the stock, saying those negatives masked continued Accounting Rate of Return strength.

The Analysts

Canaccord Genuity’s Richard Davis kept a Buy rating and $320 target price on Adobe.

Credit Suisse analyst Brad Zelnick has an Outperform rating and a $325 target price on the stock.

Barclays analyst Saket Kalia has an Overweight rating on the stock, with a $330 price target.

Wedbush analyst Daniel Ives continues to be Neutral on the stock with a $290 price target.

JMP Securities analyst Patrick Walravens kept a Market Perform rating on Adobe.

BMO Capital Markets' Keith Bachman kept an Outperform rating on Adobe but lowered his price target from $315 to $310.

See Also: Adobe Falls On Lower Q4 Guidance

The Theses

The quarter was a "solid beat for the Adobe ARR machine," noted Ives, but investors are likely now to wonder how much overall performance will be marred by Adobe's analytics cloud and consulting bookings, and its Marketo division, all of which showed signs of weakness in its third-quarter print.

Ives remains one of the sell-side analysts not recommending a Buy, with a Neutral rating on Adobe. But even he suggested the weakness should be taken in context./p>

"We cannot lose sight of the continued execution from ADBE's management team as they have engineered a legendary model transition from its original license roots to a subscription based business that has really been flawless with minimal speed bumps along the way over much of the past decade," Ives wrote in a note.

Davis also was urging investors not to over-read the print, calling Adobe's third quarter results, "Fine, not great, but certainly no reason to panic."

Other Reactions

"Adobe reported another strong Digital Media quarter with net new ARR exceeding expectations, though Digital Experience bookings missed expectations," Zelnik wrote. "We anticipate that ARR momentum continues, particularly with Document Cloud.”

Kalia said Digital Experience subscription bookings are product cycle driven and the basic business remains strong.

“Digital Media net-new ARR was ahead and so was 4Q guide – nice to see outperformance in core business," said Kalia.

Walravens: “The good news is the Digital Media business is cranking with 22% revenue growth and $386 million in new ARR, but Adobe needs to focus on the integration and execution of its two acquisitions from last year, Magento and Marketo.”

Bachman lowered the target price due to uncertainty around Digital Experience trajectory with lowered guidance on that, but ultimately believes “Adobe can deliver modest revenue upside and more ongoing EPS upside.”

Price Action

Adobe shares traded around $278.42 at publication time, down 2.2% from the open.