Why This Adobe Analyst Was Not Impressed By The Company's Updated Guidance

Adobe Inc ADBE shares traded higher by 3.1% on Wednesday after the company reiterated its fourth-quarter guidance at its Adobe Max analyst day event.

Bank of America analyst Brad Sills attended the event and said Wednesday he remains cautious about Adobe given its rising competition and challenging outlook.

Updated Guidance: At the event, Adobe guided for net new media annual recurring revenue of $550 million in the fourth quarter, in line with what the company projected on its third-quarter earnings call.

Adobe also guided for fiscal 2026 net new media ARR of $1.65 billion, below the $1.9 billion Sills was anticipating. The new long-term guidance implied ARR growth of 12%.

Sills said Adobe's fiscal 2023 EPS guidance of $15.30 also implied the company's stock buybacks will double from 10 million to 20 million in 2023.

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In addition, Adobe announced several key product enhancements, including Generative AI, Adobe Substance 3D AI-Enhanced Materials, Remove Background for Adobe Express and photo restoration and One-Click Delete and Fill for Photoshop.

Figma Overhang: Adobe announced a $20 billion acquisition of Figma in September. Sills said Adobe's stock may have limited upside until the Figma deal closes.

"We appreciate that Figma is likely to enable Adobe to address a wider base of communicators (900mn) and consumers (4bn) with a more collaborative design use case, though uncertainty as to the timing of the deal closure (sometime in 2023) is likely to remain an overhang," he said.

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Bank of America has a Neutral rating and a $350 price target for Adobe.

Benzinga's Take: Investors will likely take a wait-and-see approach to Adobe until it completes its Figma integration and the market gets a clearer picture of what to expect from a post-deal Adobe. In the meantime, slowing growth and potential saturation of existing markets may continue to weigh on the stock.

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