Categories AlphaGraphs, Analysis, Technology

Earnings preview: Adobe has a lot of upside in 2019

Adobe (ADBE) stock touched an all-time peak of $275.49 on October 1.  Since then, the stock is down 13%, primarily as part of the broad-based tech sell-off. This dip, in fact, offers a great buying opportunity for investors who are looking for a blue-chip tech stock going into its earnings.

The maker of Photoshop software is scheduled to report fourth-quarter earnings on December 13, Thursday, after the closing bell. Analysts expect the company to report earnings of $1.89 per share on a revenue of $2.42 billion.  The earnings projection represents a 50% increase from the same period last year.

Despite the recent declines, the stock has gained 37% in the trailing 12-month period and analysts continue to see more upside in 2019. ADBE stock has an average price target of $294.05 with an average consensus of Moderate Buy.

adobe acquisition time lineAdobe was quick to identify weakness in the software licensing model and shifted to a subscription-based model in 2012 for its Creative Cloud portfolio. While investors initially seemed a bit skeptic about this radical change, time has proven that the new revenue-generation model was the way forward for software.

Today, Adobe’s Digital Marketing segment, which runs Creative Cloud, generates a lion’s share of its profits. In fact, subscription fees account for four-fifths of Adobe’s total revenues.

Users are also benefiting from this new model, where they don’t have to purchase the latest version of the software every other year.

In the last five years, the San Jose, California-based firm has generated a 45% increase in earnings on an annual basis. Analysts have predicted a consistent 33% growth in the next five years.

Powered by cloud, Adobe is set for a repeat performance

The solid projections come on the back of the company’s solid cash position and line of recent acquisitions including Marketo for $4.75 billion and Magento for $1.6 billion. These acquisitions substantiate Adobe’s dominant positioning in the software realm and lack of any meaningful competitors.

Also Read:  Cisco stock surges after upbeat Q4 earnings

Adding to this is the fact that most of Adobe’s revenues come from its home market, which leaves a lot of space yet to be tapped abroad. In the coming years, the company will be looking to expand its presence in both Europe and Asia.

 

Listen to publicly listed companies’ earnings conference calls along with the edited closed caption text

Most Popular

Will the pandemic help or hurt Target (TGT)?

As the coronavirus pandemic rages on, major retailers continue to experience huge demand for food and essential items both in their stores and online. Target Corporation (NYSE: TGT) is one

GameStop (GME) swings to profit in Q4, beats estimates

GameStop Corp. (NYSE: GME) swung to a profit in the fourth quarter of 2019 from a loss last year, helped by lower costs and expenses despite a 28% dip in

Is Skechers’ global footprint strong enough to tide over present crisis?

Footwear maker Skechers USA, Inc. (NYSE: SKX) lost considerable market value in recent weeks and under-performed the industry, amid growing fears that a recession is imminent. The crisis has left