Jefferies expects a Q4 beat after management guided to a “really strong” quarter at the company’s analyst day
Adobe (ADBE) is expected to report results on its fiscal fourth quarter on Wednesday, December 13, with a conference call scheduled for 5:00 pm EDT. What to watch for:
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EXPECTING STRONG Q4:
On Tuesday, Citi raised its price target on Adobe, while keeping a Neutral rating on the shares. The firm is expecting a strong Q4 report from Adobe, saying recent price increases should drive one of the largest beats in recent years. While web traffic indicators have moderated, Citi’s price increase analysis suggests Q4 could see $90M in tailwinds from new price increase which may have not been captured in guidance.
Earlier this week, Wells Fargo also upped its price target on the stock. While the initial guide represents an important hurdle ahead of a transformative year, the firm views the Q4 setup as fairly clean, with Firefly gaining traction and as it continues to expect the AI-enabled service to deliver upside to 2024.
Two other firms have also recently raised their price targets on Adobe, while keeping Buy-equivalent ratings on the name. BMO Capital upped Adobe’s target, saying the company’s Document Cloud product has the potential to be a material AI beneficiary and may have been overlooked by investors. BMO added that it sees Adobe posting upside to estimates for Digital Media net new ARR for the November quarter, also estimating net new ARR to be $2.0B-$2.1B in FY24.
Meanwhile, Mizuho raised the firm’s price target on Adobe ahead of the company’s fiscal Q4 report. Despite the macro environment, channel checks indicate Adobe’s demand remains healthy, including among enterprises, the firm tells investors in a research note. In addition, web traffic continues to be strong, says Mizuho, which expects “good upside” to Adobe’s net new Digital Media annual recurring revenue.
POWERFUL TAILWINDS, HIGH EXPECTATIONS:
Jefferies expects a Q4 beat after management guided to a “really strong” quarter at the company’s analyst day. Focus should turn to initial FY24 guidance, which the firm expects to start off conservative yet optimistic about the pickup from creative tailwinds, AI adoption, and recent price increases. The stock setup is “tricky,” however, with Adobe up 77% year-to-date, says Jefferies. Nonetheless, the firm believes valuation remains reasonable for stock to grind higher in 2024.
MOMENTUM TO CONTINUE:
On Adobe ahead of its Q4 results, RBC Capital says it believes the company’s momentum to continue into the year-end, though investor focus will likely be around FY24 guidance and particularly management’s assumptions around GenAI contribution. The firm added that it expects a prudent initial outlook by Adobe given the recency of monetization, with bullish usage trends pointing to a larger long-term opportunity.
UPSIDE TO CONSENSUS:
With Adobe shares up over 80% year-to-date and outperforming the median large cap software stock by more than 15%, investors appear very comfortable with Adobe’s ability to monetize Generative A, Morgan Stanley says in a research note ahead of earnings. Positive feedback on the new GenAI capabilities and an increased pace of innovation bolster the firm’s conviction in upside to consensus, keeping it “firmly” Overweight-rated on the shares.
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Originally Posted December 12, 2023 – Here’s what Wall St. experts are saying about Adobe ahead of earnings
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