Adobe Delivers Impressive Q2 Results; Shares Rise 3% After-Hours

Shares of digital marketing and media solutions provider Adobe (ADBE) rallied 2.7% in the extended trading session on June 17 as the company reported better-than-expected fiscal Q2 results.

The company reported adjusted earnings of $3.03 per share, higher than the $2.81 per share estimated by analysts. However, it compared unfavorably with the $3.14 recorded in the same quarter last year.

Revenues came in at $3.84 billion, surpassing the Street’s estimates of $3.73 billion, and jumped 23% from the year-ago period.

The Digital Media business witnessed 25% year-over-year revenue growth driven by a rise in both Creative Cloud and Document Cloud revenues. Also, Experience Cloud revenue was $938 million, up 21%, while Subscription revenue increased 25% to $817 million. (See Adobe stock chart on TipRanks)

John Murphy, Executive Vice President and CFO said, “The large market opportunity and momentum we are seeing across our creative, document and customer experience management businesses position us well to deliver another record year.”

For the third quarter of Fiscal 2021, Adobe expects to report revenues of $3.88 billion. Additionally, adjusted earnings of $3.00 per share are anticipated.

Following the earnings announcement, Oppenheimer analyst Brian Schwartz reiterated a Buy rating and raised the price target to $600 from $550 on ADBE. This implies 8.8% upside potential to current levels.

Schwartz said, “Collectively, we see the strong quarterly results and guidance from Adobe and Salesforce as a sign that demand for customer engagement tools and solutions are a priority in the current IT buyer mindset.”

“Given this backdrop, we believe ADBE’s valuation multiples can hold up over the summer as investors start looking forward to the seasonally stronger second half, and ADBE can move higher on the future growth,” the analyst added.

Consensus among analysts is a Strong Buy based on 16 Buys and 3 Holds. The Adobe average analyst price target stands at $579.12, which implies upside potential of 5% from current levels. Shares have gained 13.6% so far this year.

ADBE scores an 8 out of 10 on TipRanks’ Smart Score rating system, suggesting that the stock is likely to outperform market averages.

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