Last week saw the newest quarterly earnings release from Adobe Inc. (NASDAQ:ADBE), an important milestone in the company's journey to build a stronger business. It looks like a credible result overall - although revenues of US$3.1b were in line with what analysts predicted, Adobe surprised by delivering a statutory profit of US$1.96 per share, a notable 13% above expectations. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether analysts have changed their mind on Adobe after the latest results.
Taking into account the latest results, the latest consensus from Adobe's 27 analysts is for revenues of US$13.1b in 2020, which would reflect a notable 12% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to jump 42% to US$9.44. Before this earnings report, analysts had been forecasting revenues of US$13.2b and earnings per share (EPS) of US$7.46 in 2020. Although the revenue estimates have not really changed, we can see there's been a considerable lift to earnings per share expectations, suggesting that analysts have become more bullish after the latest result.
There's been no major changes to the consensus price target of US$344, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Adobe analyst has a price target of US$404 per share, while the most pessimistic values it at US$293. 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.
It can also be useful to step back and take a broader view of how analyst forecasts compare to Adobe's performance in recent years. We would highlight that Adobe's revenue growth is expected to slow, with forecast 12% increase next year well below the historical 21%p.a. growth over the last five years. Compare this to the other companies in this market with analyst coverage, which are forecast to grow their revenue at 12% per year. Factoring in the forecast slowdown in growth, it looks like analysts are expecting Adobe to grow at about the same rate as the wider market.
The Bottom Line
The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Adobe following these results. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Adobe going out to 2024, and you can see them free on our platform here..
We also provide an overview of the Adobe Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
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