UBS Raises Price Target on Adobe Systems (ADBE) to $122 Following Strong 2Q

UBS reiterated a Buy rating on Adobe Systems (NASDAQ: ADBE), and raised the price target to $122.00 (from $114.00), following the company's 2Q earnings report. ADBE reported revenue of $1,399M in the upper half of the company's guidance of $1,365-1,415M, but below the Street's $1,404M. EPS was reported at $0.71, beating the Street's $0.68, and guidance of $0.64-0.70.

Analyst Brent Thill commented, "Q1 was a tough one to match: a beat of ~$50M/0.05 to St. revs/EPS plus full yr raise for rev/EPS/ARR; mgmt. was ebullient after a record Q1; stock reacted by gaining 11% since then (vs. S&P500 +2%); and consensus became more optimistic. In contrast, Q2 was steady: rev above guide mid-pt but $5M below St.; ARR beat guide by $10M but missed St. by $7M; EPS did come in 1 cent above hi-end of guide as op mgn beat St. by 110bp. We don't think there are any smoking guns: FY guide was reiterated; Q2 strength was in the core Creative segment; and EPS & op mgn targets look conservative. One potential area of concern is Marketing Cloud: Q3 rev guide of +7% YoY (off tough comp) implies a big Q4 +34% YoY (though off an easy 6.6% comp), in order to hit reaffirmed FY16 goal of rev +20% & bookings +30%. Marketing Cloud has been choppy, and with CRM scooping up the top e-commerce asset, some investors are asking if ADBE needs another major Cloud to drive L-T growth. We still like ADBE's prospects (upside to $150 if EPS can hit $6 in FY19 and a muted 25x P/E is applied vs. current 32x NTM); but stock could trade sideways in the S-T after the Q1 euphoria was deflated by a more normal Q2, and investors look for excitement in the 2H."

For an analyst ratings summary and ratings history on Adobe click here. For more ratings news on Adobe click here.

Shares of Adobe closed at $99.72 yesterday.

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