Adobe Inc (NASDAQ: ADBE) is set to announce second quarter financial results after the closing bell today (Tuesday). Shares of the software company are currently trading near $278 apiece after hitting a record high of $291.71 apiece earlier this year.
If earnings and revenue surpass estimates of Wall Street analysts, the stock could easily jump as it tends to make huge moves after posting financial results. On the other hand, it could easily tumble if Adobe’s top and bottom lines fall short of analyst expectations.
Morgan Stanley analysts Keith Weiss believes Adobe to report a “solid beat and raise” that should get shares “back on track.” The analyst upgraded Adobe stock to “overweight” from “equal-weight” and lifted his 12-month price target on the shares $340 from $282.
Weiss believes that Adobe will not only deliver a 20%-plus annual recurring revenue growth in the quarter, but he also sees its forecast reflecting growth rate for the remainder of the year.
Analyst surveyed by Refinitiv expect Adobe to have earned $1.78 per share, which would top the management’s guidance by a penny. Meanwhile, analysts also have also called for revenue of $2.7 billion, which would be in line with the guidance.
Revenue from the Adobe’s Digital Media segment (which accounts for 70% of the company’s total revenue) is expected to rise the 20% to 21% range, though Weiss believes the segment’s forecast has minimal visibility. Meanwhile, revenue from Digital Experience division is expected to grow 29% in the quarter.
Analysts expect accounting effects related to Adobe’s mergers and acquisitions to take a toll on its margins. Profitability is likely to start shifting higher by the next quarter as the company continues to fully integrate the three acquisitions it made in the past year.
Adobe flew past analyst forecasts in the first quarter, though shares declined nearly 4% after the company slashed its second quarter outlook. The San Jose, CA-based company has transferred all its software into cloud-based services for document management, creative work, marketing and more since hiring Shantanu Naruyen as its chief executive officer in 2007.
Importantly, rather than providing these services as one-time software purchases, it is offering them as annual subscriptions, which has grown its profits and revenues. Adobe stock was up 0.67% at $277.44 at the time of publication Tuesday.
Adobe Inc Profile
Adobe provides content creation, document management, and digital marketing and advertising software and services to creative professionals and marketers for creating, managing, delivering, measuring, optimizing and engaging with compelling content multiple operating systems, devices and media.
The company operates with three segments: digital media content creation, digital experience for marketing solutions, and publishing for legacy products (less than 5% of revenue).