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Adobe (ADBE) Stock Gains as FBR Capital Ups Price Target

On Tuesday, FBR Capital Markets increased Adobe SystemsADBE target price by almost 5% to $115 from $110. In addition, FBR Capital analyst reiterated the market perform rating on the stock.

Adobe shares inched up 0.51% in response, eventually closing at $93.42.

Rating Rationale

The analyst believes that the software company will witness increased revenue and earnings expansion. Samad Samana, an analyst at FBR Capital, is optimistic about the continued upside as a result of Adobe's transition from a licensed software business model to Internet cloud services.

Samana said, “We believe the transition to a subscription model has yielded a more attractive business model… We expect this to be reflected in fiscal 2016 and beyond”.

Samana expects the growth momentum in cloud to continue, which will expand Adobe’s market share by attracting new customers to its Creative Cloud business. He remains encouraged by the company’s efforts to convert the existing Creative Suite users to Creative Cloud buyers. This will continue to increase, thus expanding cloud revenues, going forward.

Additionally, analyst remains positive about the robust Marketing Cloud bookings growth. Adobe Marketing Cloud provides the most comprehensive set of digital marketing solutions, including analytics, media optimization, targeting, web experience management and content management products. The analyst believes that the increasing competition from Alphabet, Oracle and salesforce.com in the digital marketing business will not impact Adobe’s growth negatively.

Therefore, he expects a 20%+ revenue growth and more than 30% increase in earnings over the next two years.

Bottom Line

We remain positive about Adobe’s market position, compelling product lines (including CS cloud initiative and digital media products), continued innovation and strong balance sheet.

We believe that the company is being driven by continuous innovation in its Creative Cloud and Marketing Cloud businesses.

Adobe currently carries a Zacks Rank #2 (Buy).

Stocks to Consider

Some better-ranked stocks in the technology sector are Konami Holdings Corporation KNMCY, NetSol Technologies, Inc. NTWK and Nuance Communications, Inc. NUAN. All these stocks sport a Zacks Rank #1 (Strong Buy).

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ADOBE SYSTEMS (ADBE): Free Stock Analysis Report
 
NUANCE COMM INC (NUAN): Free Stock Analysis Report
 
NETSOL TECH INC (NTWK): Free Stock Analysis Report
 
KONAMI CORP-ADR (KNMCY): Free Stock Analysis Report
 
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