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Shareholders might have noticed that Adobe Inc. (NASDAQ:ADBE) filed its annual result this time last week. The early response was not positive, with shares down 2.1% to US$476 in the past week. The result was positive overall - although revenues of US$13b were in line with what the analysts predicted, Adobe surprised by delivering a statutory profit of US$10.83 per share, modestly greater than expected. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the current consensus from Adobe's 20 analysts is for revenues of US$15.2b in 2021, which would reflect a meaningful 18% increase on its sales over the past 12 months. Statutory earnings per share are forecast to plunge 21% to US$8.67 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$14.8b and earnings per share (EPS) of US$8.82 in 2021. There doesn't appear to have been a major change in sentiment following the results, other than the modest lift to revenue estimates.
It may not be a surprise to see thatthe analysts have reconfirmed their price target of US$553, implying that the uplift in sales is not expected to greatly contribute to Adobe's valuation in the near term. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Adobe analyst has a price target of US$605 per share, while the most pessimistic values it at US$410. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. Next year brings more of the same, according to the analysts, with revenue forecast to grow 18%, in line with its 20% annual growth over the past five years. Compare this with the wider industry, which analyst estimates (in aggregate) suggest will see revenues grow 14% next year. So it's pretty clear that Adobe is forecast to grow substantially faster than its industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. The consensus price target held steady at US$553, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on Adobe. Long-term earnings power is much more important than next year's profits. We have forecasts for Adobe going out to 2023, and you can see them free on our platform here.
We don't want to rain on the parade too much, but we did also find 1 warning sign for Adobe that you need to be mindful of.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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