Adobe Inks $1.5B Deal To Buy Workfront; Street Bullish


Adobe has entered into a definitive agreement to snap up Workfront, a work management platform for marketers, in a deal worth $1.5 billion.

The move comes as Adobe (ADBE) is expanding its creative software tools through digital offerings like Adobe Document Cloud and Adobe Experience Cloud, to meet the demand for remote work collaboration solutions exacerbated by the coronavirus pandemic.

The acquisition gives Adobe more online marketing tools for Adobe Experience Cloud, which provides products related to marketing and analytics and is used by students, social media influencers, photographers, filmmakers, and designers, among others.

Founded back in 2001, Workfront, which has more than 3,000 customers and 1 million users, facilitates businesses to efficiently manage content, plan and track marketing campaigns, and execute complex workflows across teams.

“Adobe is the undisputed leader in content creation, management, delivery, and measurement and a trusted partner to digital leaders around the globe,” said Adobe’s Anil Chakravarthy. “The combination of Adobe and Workfront will further accelerate Adobe’s leadership in customer experience management, providing a pioneering solution that spans the entire lifecycle of digital experiences, from ideation to activation.”

The transaction, which is subject to regulatory approval and customary closing conditions, is expected to close during the first quarter of Adobe’s 2021 fiscal year.

Adobe and Workfront already share a longstanding partnership with product synergies and a growing base of over 1,000 shared customers. Shared Adobe and Workfront customers include Deloitte, Under Armour, Nordstrom, Prudential Financial, T-Mobile, and The Home Depot. Workfront is equipped with APIs that enable a seamless connection to Adobe Creative Cloud and Adobe Experience Cloud.

For the current fiscal fourth quarter, the company projects sales of $3.35 billion, almost in line with the $3.36 billion Street consensus, and adjusted earnings of $2.64 per share. Adobe expects digital media segment revenue to increase by 18% in the quarter ending in November, which is above the 16% forecasted by analysts.  (See ADBE stock analysis on TipRanks)

Oppenheimer analyst Brian Schwartz recently raised the stock’s price target to $550 (17% upside potential) from $430 and maintained a Buy rating, saying that the company’s conservative F4Q estimates reinforce his view that ADBE should be a core investment holding.

“Adobe stands out from almost any group as the pioneering trailblazer of digital creative and marketing tools and services, and the company has transitioned and progressed into a verifiable cloud platform success story as it rides atop multiple product pillars of substantial scale, profits, and growth trajectory,” Schwartz wrote in a note to investors. “Adobe is highly profitable, unlike most of the other names in our SaaS/Applications universe, and this characteristic provides a unique level of valuation support versus company peers.”

The rest of the Street shares Schwartz’s bullish outlook. The Strong Buy analyst consensus boasts 15 Buys versus 3 Holds. Despite this year’s 43% share rally, the $559.83 average price target implies upside potential of an additional 19% to current levels.

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