This software company beat analysts’ earnings estimates by $0.36 last quarter. It is forecasted to grow earnings at an annual pace of 17.5% over the next five years.
Adobe Inc. (ADBE)
From Wall Street Stock Forecaster
Adobe Inc. is a buy. The company (Aggressive Growth Portfolio; TSINetwork Rating: Average) makes software that lets computer users create, edit, and share documents in the popular PDF format. It also makes a variety of electronic-publishing programs.
Adobe’s decision a few years ago to switch to selling its programs as ongoing subscriptions instead of one-time purchases continues to pay off for its investors: In the quarter ended March 5, 2021, revenue rose 26.3%, to a record $3.91 billion from $3.09 billion. Earnings jumped 38.3%, to $3.14 a share from $2.27.
Meantime, Adobe keeps making key acquisitions to move into new areas and broaden the computer applications available to customers. For instance, in November 2018, the company bought marketing-automation firm Marketo for $4.75 billion. It helps brands track their customers’ actions online, from the time they get an email to the time they purchase a product. It then provides those brands with that information, which they then use to create more-personalized promotions.
In addition to making acquisitions to drive investor gains, Adobe spends a high 18% of its sales on research. The company’s balance sheet is also very strong: Adobe holds cash of $5.0 billion and its long-term debt is just $4.1 billion.
The stock trades at 42.7 times the projected fiscal 2021 earnings of $11.88 a share. That’s an acceptable multiple as more people rely on Adobe’s products to work remotely due to COVID-19. The company’s also free from the kind of global supply chain disruptions that the virus has caused manufacturers.
Adobe Systems is a buy.
Patrick McKeough, Wall Street Stock Forecaster, tsinetwork.ca, 888-292-0296, June 2021