Analysts raise numbers on Adobe citing LT opportunity, ignore soft outlook
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Adobe Systems (NASDAQ:ADBE) shares traded 2.5% lower in pre-open Friday after the company offered fourth quarter revenue guidance that just met analyst estimates, despite the optimism around the new GenAI products and pricing strategy.
“We are unleashing a new era of AI-enhanced creativity around the world with innovations across our product portfolio,” said Shantanu Narayen, chair and CEO, Adobe. “The recent launches of Firefly, Express, Creative Cloud and GenStudio make Adobe magic available to millions of users.”
In the third quarter, Adobe reported earnings per share of $4.09, surpassing the analyst estimate of $3.97 by $0.12. The company also achieved revenue of $4.89 billion for the quarter, slightly exceeding the consensus estimate of $4.87B.
Looking ahead to the fourth quarter, Adobe anticipates fourth quarter EPS to be in the range of $4.10 to $4.15, exceeding the consensus estimate of $4.06. For fourth quarter revenue, Adobe Systems forecasts a range of $4.975B to $5.025B, in line with the consensus of $5B.
“Adobe delivered world-class margins and earnings in Q3, while making significant investments in our technology platforms,” said Dan Durn, executive vice president and CFO, Adobe. “Our innovation engine, global reach and strong operational rigor position us to capture the massive opportunities ahead.”
The company delayed the presentation of FY24 guidance for December.
Morgan Stanley analysts are very positive on the outlook for Adobe given the company’s GenAI portfolio.
“Digital Media Net New ARR 12% ahead of consensus showed impressive momentum in the core business. The initial look into the scope of GenAI opportunities ahead for ADBE was even more impressive. Combined, we emerge more confident in our above consensus FY24 forecasts, keeping us firmly OW,” they wrote in a note.
Similarly, Wells Fargo analysts see a ‘favorable’ 2024 path for Adobe. They hiked the price target by $25 to $650 per share.
“Despite elevated expectations heading in, we felt ADBE held the line w/solid upside on both NNARR & EPS. GenAI monetization details help set the stage for next mo’s Max conf, where we expect the AI product roadmap will expand. Keep ‘OW’,” they said.