Adobe (ADBE) Stock Lower after Solid 3Q Results, But Lower than Expected Guidance

Shares of Adobe Systems were off -1.81 or -2.25 percent to $78.50 per share in Friday’s premarket after the company reported better than expected earnings yesterday after the market close, shares were initially +1.5 percent higher in Thursday’s aftermarket following the announcement. Adobe Systems stock closed at $80.31 per share, down -0.22 or -0.27 percent in Thursday’s regular trading session.



San Jose, California based Adobe Systems is one of the world’s largest software companies and has been at the forefront of computer software application development and marketing since its founding in 1982.
Adobe was started by John Warnock and Charles Geschke, from XeroxPARC to create the Postscript software for desktop publishing, subsequently licensed to Apple Computer. The company has a large array of products including desktop and server software, internet web design programs, document and video formats and web content management software. The company also sells its services through Creative Cloud, a subscription service that offers subscribers access to Adobe software such as Photoshop and Illustrator for a monthly fee.

For the company’s fiscal third quarter, Adobe reported earnings of $174.5 million, or $0.34 per share on revenue of $1.22 billion compared to $44.7 million or $0.09 per share in the same period one year ago . With the exclusion of some items, non-GAAP earnings came to $0.54 per share. The analyst consensus was for the company to report earnings of $0.50 per share on revenue of $1.21 billion.

Shantau Narayen, Adobe’s President and Chief Executive Officer said in the post earnings analyst conference that, “In Digital Media, Creative Cloud has become the de facto platform for all creatives, providing the tools and services to fulfill every creative need.   We are migrating customers from our Creative Suite installed base as well as attracting new users with strong adoption across our Individual, Team and Enterprise offerings. Net new Creative Cloud subscriptions grew by 684 thousand during Q3 and we exited the quarter with over 5.3million subscriptions. Combining this adoption with the annual value of enterprise agreements and success with Adobe Stock, Creative Annualized Recurring Revenue, or “ARR,” achieved sequential growth of $262 million.”

Digital Media Solutions generated +63 percent of revenue at $770 million, up +2.9 percent from the same period one year ago, while Marketing Cloud Revenue came to $368 million in the third quarter, an increase of +27 percent from last year’s third quarter. The company saw stable demand in all world markets with revenue in the Americas increasing +57 percent of total EMEA of 29 percent with a +14 percent increase in Asia.

Adobe expects GAAP earnings of $0.32 to $0.38 per share in the fourth quarter on a share count of 506 to 508 million and non-GAAP earnings of $0.56 to $0.62 per share. Revenue is anticipated at $1.275 to $1.325 billion. The analyst consensus for non-GAAP earnings is for $0.50, nevertheless analysts expected revenue of $1.366 billion in the fourth quarter.

In a separate release, Adobe announced that Senior Vice President David Wadhwani had decided to leave the company. Adobe announced that Bryan Lamkin would replace Wadhwani and head up the Digital Media business, including Adobe Document Cloud and Creative Cloud.

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Published on Sep 18, 2015
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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