Adobe's Q3 Performance Signals New Growth Era, Says Piper Sandler Analyst

Piper Sandler's Brent A. Bracelin raised their price target on Adobe (NASDAQ: ADBE) by 13.6% from $572 to $650 on 2023/09/15. The analyst maintained their Strong Buy rating on the stock.

Bracelin's decision to raise the price target comes after reviewing Adobe's Q3 2023 earnings, reported on September 14, 2023. The analyst noted that the company's Q3 quarter was the third in a row of 13% constant currency growth, describing it as "solid." Bracelin believes that this consistent growth indicates that FY 2023 could mark the start of a new growth era for Adobe, following a period of moderation in the previous two years.

Looking ahead, Piper Sandler expects Adobe's growth to reaccelerate next year. Bracelin attributes this anticipated growth to factors such as new pricing, new products, and generative AI tailwinds. In light of these positive prospects, the analyst recommends that large-cap growth investors buy Adobe stock "on weakness" ahead of the Analyst Day and user-focused Adobe Max Creativity Conference events scheduled for October 10, 2023.

For Q3 2023, Adobe reported earnings per share (EPS) of $4.09, surpassing the Zacks Consensus Estimate of $3.97 by 3.0%. This also represented a significant increase of 20.3% compared to Q3 2022's EPS of $3.40. The company's revenues for the quarter were $4.89 billion, roughly in line with the Zacks Consensus Estimate and an impressive 10.4% growth over Q3 2022's revenues of $4.43 billion.

Looking ahead to Q4 2023, Adobe's management has provided guidance of an EPS range of $4.10 to $4.15 and projected revenues between $4.98 billion and $5.03 billion. CEO Shantanu Narayen expressed enthusiasm about the company's future, stating, "We are unleashing a new era of AI-enhanced creativity around the world with innovations across our product portfolio. The recent launches of Firefly, Express, Creative Cloud, and GenStudio make Adobe magic available to millions of users."

In addition to Piper Sandler's rating update, other analysts also revised their price targets for Adobe on September 15, 2023. Citigroup's Tyler Radke raised their price target by 7% to $570, maintaining a Hold rating on the stock. Baird's Rob Oliver increased their price target by 8% to $500, also maintaining a Hold rating. Barclays's Saket Kalia raised their price target by 3.2% to $620, while also maintaining a Hold rating.

Overall, 66.7% of top-rated analysts currently rate ADBE as a Strong Buy or Buy, while 33.3% see it as a Hold. Notably, no analysts recommend or strongly recommend selling the stock.

The consensus forecast among analysts predicts that ADBE's upcoming year will deliver earnings per share (EPS) of $12.87. If these analysts are correct, this would represent a 22.5% increase in yearly EPS on a year-over-year basis.

Since Adobe's latest quarterly report on September 14, 2023, the stock price has experienced a 4.2% decline. However, on a year-over-year basis, Adobe's stock has seen impressive growth of 71.1%. During this period, Adobe has outperformed the S&P 500, which has experienced a 14.1% increase.

Piper Sandler analyst Brent A. Bracelin ranks in the top 1% out of 4,329 Wall Street analysts, with an average return of 10.6% and a 55.5% win rate. Bracelin specializes in the Communication Services and Consumer Cyclical sectors, among others.

Adobe Inc. is a global software company that operates in three segments: Digital Media, Digital Experience, and Publishing and Advertising. The Digital Media segment offers products and services that empower individuals, teams, and enterprises to create, publish, and promote content. Adobe's flagship product is Creative Cloud, a subscription service that provides access to creative products. The Digital Experience segment provides a platform and applications that enable brands and businesses to create, manage, execute, measure, monetize, and optimize customer experiences. The Publishing and Advertising segment offers various products and services, including e-learning solutions, technical document publishing, web conferencing, document and forms platforms, web application development, and high-end printing. Adobe distributes its products and services through direct sales, app stores, and a network of distributors, resellers, and retailers.

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