Adobe (ADBE) has consistently remained a market leader in the Digital Media space. Solid demand for its cloud offerings, namely, Creative Cloud, Document Cloud, and Adobe Experience Cloud products are aiding the company’s top-line growth. Increasing revenues from subscription, robust demand for online video creation, solid adoption of its most successful product —Acrobat, and consistent improvement in average revenue per user remain major tailwinds for the company.
Adobe’s strong market position, powerful product lines, and continued innovations are further positives. The company released its third-quarter fiscal 2021 results on September 21. It saw a 22% year-over-year increase in revenues and a 21% year-over-year increase in non-GAAP earnings per share. (See Adobe stock chart on TipRanks)
Importantly, $1.4 billion cash generated from operations also speaks of Adobe’s financial strength. Such financial positions enable a company to comfortably invest in growth initiatives like innovations and strategic acquisitions. These positive data points keep me bullish on the company.
That is exactly what the company is doing. Notably, Adobe is known to take advantage of its financial standing to pursue acquisitions. Last month, the company inked a definitive agreement to acquire video review and approval platform provider Frame.io for $1.28 billion, to bolster its video editing process. This will mark the 53rd acquisition completed by Adobe in 31 years.
Moreover, product innovations are Adobe’s mojo. In its latest innovation effort, the company is on track to add payment services to its commerce platform — Adobe Commerce— to strengthen its presence in the digital commerce domain. The payment services will be based on PayPal’s (PYPL) platform, helping merchants on Adobe Commerce to make and accept transactions via credit cards, debit cards, PayPal, and Venmo. A buy now, pay later option will also be offered to customers.
This brings us to another aspect of the business —Partnerships. Notably, partnerships are also playing an important role in Adobe’s growth story, with compelling collaborations with PayPal and Walmart (WMT), which the management believes to be game-changing deals, enabling enterprises to offer Amazon-like (AMZN) experiences in e-commerce. The company is also optimistic about TAM (total addressable market) for the merchant services ecosystem being a growth fuel for the company in the long haul.
Recently, Goldman Sachs analyst Kash Rangan reiterated a Buy rating on the stock and raised the price target to $765 from $735. He believes the lukewarm beat of expectations by Adobe to be a result of summer-related seasonality, which delayed buying decisions, and does not diminish the upside prospects in the forthcoming months.
Wall Street seems to be equally optimistic about Adobe, with the consensus rating being a Strong Buy, based on 17 Buys and 3 Holds. The average Adobe price target of $721.83 indicates an upside potential of 14.5%.
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclosure: At the time of publication, Chandrima Sanyal did not have a position in any of the securities mentioned in this article.
Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.
