Adobe Inc. ADBE survived the market sell-off last week. And it did it relatively well. As most of the tech sector, its stock has fallen from its peak price and now it looks it has even started to rebound. But the question of how far it will go keeps popping up and is surely on investors' minds.
Background
Photoshop is probably one of the company's main products or least the product which made Adobe famous as everyone knows the company by it. But today, Adobe is so much more than just Photoshop. Adobe has become a significant name in the cloud-based design, data analytics and document management software (DMS).
It provides graphics software solutions with its Creative Clouds. Also, it offers Documents Clouds services equipped with its PDF document format. And there is also marketing software and services, offered through Experience Cloud services.
Main Competitors
Adobe's wide number of services and activities competes with many companies and their respective business segments. Even Apple Inc. AAPL, IBM Corporation IBM and Microsoft Corporation MSFT can be considered as Adobe's competitors in some segments, but more appropriate competitors are DocuSign, Inc. DOCU, Dropbox, Inc. DBX, salesforce.com, inc. CRM, Shutterstock, Inc. SSTK, Autodesk, Inc. ADSK.
Earnings Estimates
The company is expecting quarterly revenues of $3.04 billion, which is an increase of 17% compared to the same quarter a year ago. Expected operating earnings are $2.23 a share, which is an increase of 30%. Whole year sales are expected to be $13.15 billion with a profit of $9.75 per share. If the company manages to beat expectations, investors will surely help the company's stock get back up. If the results fall short, that might push the company back to a selloff point.
For the past three years, Adobe has achieved an annual earnings per share growth rate of 24%. This is a very remarkable figure, making Adobe above its competitors in the desktop software market. So, maybe Photoshop made Adobe a leader in the desktop software industry years ago, but the creation of Creative Cloud shows that the company is reinventing itself every day with new challenges, fortifying its leadership position as opposed to living on past glory.
Outlook
We should maybe take into consideration that 15% of the company's revenues come from the Asia-Pacific region. And due to the Coronavirus outbreak in China, some of the company's revenues may take a hit. On the other hand, it is logical to assume that those predictions are included in the company's expectations.
Morgan Stanley analyst Keith Weiss's viewpoint is in favor of slow-but-steady assets with long-term growth prospects, like Adobe. His target price for Adobe between $410 and $450, which is a nice increase from the current share price. With earnings coming up on March 12th, expectations are that Adobe will maintain its strong financial position, and it will continue to demonstrate its champion qualities. Let wait for the earnings call so you can still hold ADBE stock with confidence.
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