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Adobe (ADBE) Hits New 52-Week High on Strong Q1 Results

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Shares of Adobe Systems Incorporated (ADBE - Free Report) rallied to a fresh 52-week high of $228.88, eventually closing a tad bit lower at $225.55 on Mar 16.

The momentum can be attributed to the company’s impressive first-quarter fiscal 2018 results. Adobe reported non-GAAP earnings of $1.55 per share, which increased 64.9% on a year-over-year basis. Further, the company delivered a positive earnings surprise of 8.39% in the quarter.

Revenues came in $2.08 billion, up 23.8% from the year-ago quarter, which was driven by increasing subscription for its cloud applications and robust demand for its innovative solutions.

The stock has gained 78.0% over a year, outperforming the industry’s rally of 36.1%.

We believe that Adobe’s strong focus on customer retention by delivering innovative solutions and entry in emerging markets, which are experiencing rising demand for cloud applications, will continue to drive the top line in 2018.

Currently, Adobe carries a Zacks Rank #2 (Buy) and has a market capital of $86.27 billion.

 



 

Growing Subscription for Cloud Products

Adobe’s strong efforts to bolster its presence in the cloud-related software areas remain positive. Subscription revenues represented 86% of total revenues and reflected 29.7% year-over-year growth in the first quarter. Adobe entered the subscription model with the launch of Creative Cloud (“CC”).

During the first quarter, the company acquired several new creative agreements and most of them included service offering which led to the solid growth of CC. Moreover, increasing net new subscriptions for CC will continue to benefit Adobe.

Additionally, the company is experiencing growing adoption of Acrobat and Adobe Sign, which is continuously contributing to the strong performance of Document Cloud (“DC”).

Robust Analytics Cloud, Marketing Cloud and Advertising Cloud offerings along with emerging solutions such as Audience Manager, Campaign, Target and Media Optimizer solutions led to strong bookings across these cloud platforms.

Needless to say, Adobe is benefiting from the diversification of its product portfolio which earlier consisted of only graphic design and productivity offerings.

Robust Product Portfolio

The company is experiencing robust demand for its product offerings. New and innovative products like Adobe Character Animator, Spark, Lightroom CC, Dimension and XD are bringing in more customers.

Also, Adobe Premiere Pro and After Effects will continue to gain momentum with the rising demand for video and editing from film makers and production houses. Premiere Pro witnessed a robust demand in the recent Sundance Film Festival.

Estimate Revisions Remain Positive

The company witnessed an upward revision in its earnings estimates by a penny in the last seven days. The Zacks Consensus Estimate for fiscal 2018 and 2019 is currently pegged at $6.26 and $6.97, respectively.

Other Stocks to Consider

Investors interested in the broader technology sector can also consider some other top-ranked stocks like ManTech International Corporation , DST Systems and ACI Worldwide (ACIW - Free Report) . All the three 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 ManTech International, DST Systems and ACI Worldwide is currently pegged at 8%, 10% and 12%, respectively.

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