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Is Adobe Nonetheless a Good Software program Inventory to Purchase?

27, 2021

4 min read

This story originally appeared on StockNews

As one of the largest software and cloud computing companies in the world, Adobe (ADBE) saw solid financial growth over the past year, driven by pandemic tailwinds. However, will ADBE be able to maintain its growth trajectory if the tech industry slows, if a faster-than-expected macroeconomic recovery sets in? Read More

Adobe, Inc. (ADBE) is one of the biggest names in the cloud computing and software industry with a market cap of $ 244.83 billion. The growing demand for cloud computing and digital media services, as well as the company's strategic expansion policies, enabled ADBE to report record results in the final quarter that ended March 5th.

Revenue for the first quarter of fiscal year grew 26% year over year to $ 3.91 billion. This is due to Document Cloud revenue increasing 37% and Digital Media revenue increasing 32%. Non-GAAP earnings per share increased 38% to $ 3.14 from the same period last year. ADBE's shares were up 49.9% last year and 9.9% last month.

We anticipate the appreciation of the ADBE share price is likely to continue over the coming quarters as the company expects sales of the Digital Media segment and the Digital Experience segment to grow 21% and 18%, respectively, year over year.

Click here to read our Software Industry Report for 2021

The following could affect ADBE's performance in the short term:

Industry tailwind

The cloud computing industry is expected to grow significantly in 2021 and beyond thanks to its role in sustaining the remote working model instituted by COVID-19 lockdown conditions. A new wave of coronavirus infections currently plaguing India, considered a global technology and outsourcing hub, as well as rising cases reported in the US show that work must be continued from home for the foreseeable future.

End-user spending on public cloud services is expected to increase 23.1% compared to the previous year As a result, the demand for cloud computing and software services from ADBE is expected to increase this year.

Impressive growth story and profitability

ADBE sales grew 21.13% over the past three years. EBITDA and net income increased by 25.11% and 43.63%, respectively, during the period. The company's indebted free cash flow has seen an annual growth rate of 25.34% over the past three years, while EPS improved to 45.24% CAGR over that period.

ADBE's 12 month gross profit margin of 87.45% is 79.9% above the industry average of 48.6%. The return on sales and the indebted free cash flow margin of 40.68% and 34.25%, respectively, are well above the industry average of 4.53% and 12.37%.

Additionally, ADBE's 12-month trailing ROE, ROTC, and ROA of 46.36%, 17.78%, and 22.28%, respectively, are cheap compared to the industry average.

Consensus rating and price target reflect the upside potential

Of the 21 Wall Street analysts who rated ADBE, 18 rated Buy and three rated Hold. The stock has a 12 month target price of $ 564.68. This indicates an upside of 9.5%. The forecast for the stock ranges from a low of $ 500 to a high of $ 650.

POWR ratings reflect encouraging outlook

ADBE has an overall B rating, which is the same as the purchase on our proprietary POWR rating system. The POWR ratings are calculated taking into account 118 different factors, with each factor being optimally weighted.

ADBE is rated A for quality and B for mood. The high profitability of the company justifies the quality level. Analysts expect ADBE's EPS and revenue to grow 14.7% and 17.9%, respectively, year-over-year, which is in line with the sentiment score.

Of the 119 shares in the Computer program In the industry, ADBE ranks 22nd. In addition to the grades we highlight, ADBE's ratings for stability, dynamism, growth, and value can be viewed Here.

Click here to view the top rated stocks in the software application industry.

Bottom line

ADBE's cloud computing and digital media software services are among the most widely used products in the world. As global economic growth continues to be highly technology-intensive, we expect ADBE to see steady growth in its financial data due to its high market capitalization and international market presence.

Click here to read our Software Industry Report for 2021

ADBE stock rose $ 0.55 (+ 0.11%) after trading on Tuesday. Since the beginning of the year ADBE has gained 3.44%, while the reference index S&P 500 gained 12.04% over the same period.

About the author: Aditi Ganguly

Aditi is a seasoned content developer and financial writer who is passionate about helping investors understand the pros and cons of investing. She has a keen interest in the stock market and a fundamental approach to analyzing stocks.


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