Adobe Systems Inc (NASDAQ:ADBE), the digital media group which makes Photoshop, zipped past Wall Street’s profit and revenue estimates for its fiscal second quarter on the back of a pick-up in sales from its digital media and creative groups.
The results failed to impress investors, however, as shares fell by 2.6% in pre-market trade to US$251.30 after closing up slightly at US$258.10.
For the fiscal second quarter ending June 1, Adobe reported adjusted earnings per share of US$1.66 on revenue of US$2.2bn. These results crushed the average numbers Wall Street analysts had penciled in of US$1.54 per share on revenue of US$2.16bn.
Despite the downward push on Adobe’s share price, Brent Thill and John Byun, research analysts with Jefferies, who have a Buy rating on the stock, increased their price target on Adobe’s stock to US$300 from US$265, citing the momentum from its Cloud businesses as well as the success of its subscription models.
“We would stay long as Adobe continues to grind higher,” the analysts wrote in a note to investors. “Adobe delivered another broad beat plus favorable FQ3 guidance, with only pushback being high expectations on stock up 47% year to date (versus Nasdaq 12%).”
“Adobe is benefiting from a highly visible subscription model and secular tailwinds in design, marketing and internet,” they added.
Baird Equity Research’s Rob Oliver, who maintains an Outperform rating, also hiked Adobe's price target to US$280 from US$260. Similiarly, Oliver attributed the 3% sell-off in after-hours trade to pushback stemming from the dramatic run up in Adobe’s share price and slightly less upside in the company’s annual recurring revenue.
“Adobe reported solid 2Q18 May results, with a bit less upside in “hot metric” of annual recurring revenue versus prior quarters,” he wrote.
Revenue from its digital media segment came to US$1.55bn while creative revenue jumped to US$1.3bn. Sales from Adobe’s document cloud division amounted to US$243mln, which was 22% higher than its performance in same quarter last year.
Adobe expects fiscal third-quarter revenue of US$2.24bn and adjusted earnings of US$1.68 per share, which is also higher than Wall Street’s average estimate of revenue of US$2.22bn on adjusted earnings per share of US$1.61 per share.
-- Updated to include Wall Street analysts' commentary and pre-market share price movement