Adobe Inc. (NYSE: ADBE) will report its third quarter of 2021 earnings on Tuesday, September 21, 2021, after the closing bell.
What to look for
Adobe is expected to benefit from broader digital transformation with a highly comprehensive end-to-end product offering that differentiates the company from rivals. This will enable the company to drive holistic sales in all its clouds, with earnings and revenue expected to top estimates. In addition, the company's comprehensive software solutions portfolio has made Adobe the gold standard in collaboration, content creation, and consumption.
Earnings: Stockearning’s Estimated EPS is expected to be $3.02 per share. If the company meets this EPS, it will be an 18% YoY increase in profit. Historical EPS Performance for the past 12 quarters shows that the company has topped earnings estimates eleven times (91%) and missed once (8%). In the second quarter of 2021, the company reported EPS of $2.56 compared to estimates of $2.35 per share.
Revenue: In Q2 2021, the company topped revenue estimates by posting revenue of $3.84 billion driven by a strong performance of Adobe Document Cloud, Creative Cloud, and Experience Cloud. Also, subscription revenues drove the results. For the current quarter, the company expects to report revenue of around $3.88 billion.
Stock movement: Since the last earnings release, Adobe stock has gained 18.7%. Following the Earnings release, Share prices were UP 25 times in the past 45 quarters. Therefore, the Historical price reaction suggests a 55% chance for the share price to move UP after the release of Q3 earnings. According to the Stockearning algorithm, the predicted first-day move on the stock after earnings release is 4%, while the predicted move on the seventh day is 4%.
What analysts are saying
Morgan Stanely’s Keith Weiss has raised his target price for Adobe from $610 to $736 and maintained a "Buy" rating on the stock ahead of the company's Q3 earnings report. Weiss stated that there is the possibility of the company positioning better than the anticipated Q3 result. Although the analysts don't expect FY2022 guidance, he expects the company to manage more than 20% EPS growth. Weiss said he is moving his valuation basis year to FY 2023 and expects a 17% CAGR in revenue between FY2021 through FY 2023.
Barclays analyst Saket Kalia also raided the price target from $660 to $740 and kept the "Buy" rating on the shares. The analyst expects $440 million in net new digital media annual revenue with an upside case of more than $470 million. Another analyst that maintained a buy rating on the stock is BMO Capital's Keith Bachman, who raided the price target from $630 to $730. Bachman is confident in Adobe's "durable growth" and expected upside in its Q3 report. The analyst projects upside to the new Digital Media annual revenue guidance of $440 million.
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