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Adobe's Tie-Up With Amazon to Boost E-commerce Initiatives

Zacks Equity Research

Adobe Systems Incorporated ADBE is leaving no stone unturned to gain traction in the e-commerce space on the back of its Magento buyout.

The company has teamed up with the e-commerce giant, Amazon AMZN and rolled out new branded stores for sellers integrated with merchant solution, Magento Commerce, on Amazon.com.

Notably, Magento offers e-commerce content management system software which helps in developing and operating web stores, handling online purchases, shipping and returns.

The newly launched solution is aimed at helping Amazon’s third-party sellers, especially smaller merchants to build and manage storefronts with their own first-party commerce experience by syncing with Amazon ecosystem, consequently capitalizing on emerging trend of direct-to-customer (D2C) selling.

Further, on combining branded storefront service with tools like Amazon Pay and Fulfillment by Amazon, these sellers will be able to seamlessly receive payments from customers and enhance delivery system.

Additionally, sellers will be to manage their presence on Amazon’s e-commerce platform with support of the new service. Further, merchants now can utilize the Magento platform to manage inventory, pricing and other details on Amazon listings.

Deal Rationale

The latest service is likely to be beneficial to both Adobe and Amazon.

Magento Commerce is well equipped to accelerate the page load times and scale up operations during the peak shopping seasons. These along with the above-mentioned benefits are likely to aid customers in enhancing customer reach.

This in turn is expected to aid in strong adoption of Adobe’s new service which is currently available in North America and will soon be launched in Europe. Further, this will drive the performance of Adobe Experience Cloud in the near as well as long term.

Meanwhile, the service will benefit Amazon’s sales channel as it helps Magento customers in strengthening presence on the former’s marketplace by integrating and managing listings.

Further, Amazon with Adobe will enhance D2C selling capabilities.

Adobe Systems Incorporated Revenue (TTM)

 

Adobe Systems Incorporated Revenue (TTM)

Adobe Systems Incorporated revenue-ttm | Adobe Systems Incorporated Quote

D2C Holds Promise

Direct selling strategy is gaining steam in this data driven world with growing proliferation of smartphones, cloud services and social media.

Further, from the seller point of view, the strategy helps them to strengthen brand relationship with customers. Moreover, they are able to analyze demand for their product with the help of massive customer data collected while selling the product directly.

We believe the latest service and collaboration with Amazon are likely to aid Adobe in reaping benefits from the potential D2C space which is gradually becoming an integral part of e-commerce market.

Zacks Rank & Stocks to Consider

Currently, Adobe carries a Zacks Ranks #3 (Hold).

Some better-ranked stocks that can be considered in the broader technology sector are Cadence Design Systems, Inc. CDNS and Verint Systems Inc. VRNT. Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long term earnings growth rate for Cadence and Verint is currently pegged at 12% and 11%, respectively.

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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
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