Adobe Stock Forecast: There’s Still Room For Adobe’s Stock To Go Higher

motek 1The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology  – Senior Analyst at I Know First.

Adobe Stock Forecast

Summary:

  • Adobe’s stock price has posted a new 52-week high. I say this stock can still go higher.
  • Strong growth in software subscription will continue to propel Adobe’s topline and bottomline growth.
  • Adobe has little to zero competition in commercial design software.
  • Adobe’s stock has strong buy signals based on I Know First Forecast.

I last endorsed a Buy Rating for Adobe (ADBE) here at I Know First last December. If you heeded my advice then, you would have already enjoyed a +18% gain. Adobe’s stock shot up more than 7% yesterday, posting a new 52-week high of $108.22. Investors rallied around the ADBE after the company beat Q3 estimates.

Some profit-taking is already justified. However, it might be smarter to stay long on ADBE this week. Q3’s Annual Recurring Revenue ((ARR)) from Adobe’s graphic/design software subscription service grew 39% Year-over-Year to $803 million. This is prima facie evidence that more people are signing-up for Adobe Creative Cloud.

Adobe Stock Forecast

(Source: Amazon.com)

Adobe has consistently beaten Wall Street estimates over the last eight quarters. I expect Adobe again beat Q4 EPS and revenue estimates. Consequently, ADBE’s price may shoot up higher than $115 before 2016 ends. Market reality is that Adobe’s Creative Cloud software suite still enjoys an almost-monopoly over the graphic/design/web software industry. Corel Corp. is still too small to challenge Adobe.

Strong Q4 Guidance Is Strong Incentive To Go Long ADBE

Adobe’s stock has more room to go higher. My fearless forecast is based on the company’s strong Q4 guidance. Adobe expects its Creative Cloud subscription or Annual Recurring Revenue for FY 2016 to generate $4 billion. The official guidance of $5.80-%5.85 billion FY 2016 revenue is more than 20% higher than last year’s $4.8 billion. Creative Cloud software subscription is still Adobe’s biggest money-maker. Strong growth in Creative Cloud subscription means Adobe’s stock can still improve its YTD gain of $13.12%.

Adobe’s latest guidance chart below also promises big 20%-30% year-over-year gains in its Digital Media and Marketing Cloud business segments. Now that most website owner and content publishers are fighting back against ad-block using visitors, I expect Adobe’s Marketing Cloud services to eventually become a 20% or more contributor to Adobe’s annual revenue stream.

Adobe Stock Forecast

(Source: Adobe)

Delayed Affinity Photo and Designer Is Good For Adobe

Windows-based graphic designers, web designers, photographers, and lay-out artists will continue to subscribe to Adobe Photoshop and Illustrator CC. Serif is taking a long time porting its Affinity Photo software to Windows. The vector illustration software Affinity Designer is also still in beta. Affinity Photo and Affinity Designer are better than Corel Corporation’s CorelDRAW suite. Unfortunately, Serif’s commercial alternatives to Adobe Creative Cloud are still limited to the Mac platform.

Serif’s inability to fast-track the Windows versions of its Mac-based photo editing and graphic design software product is a boon to Adobe. This year is almost over and I do not expect Serif to launch any commercial Windows versions of its products. Due to the lower costs of Windows-based graphics workstations, I believe that Windows-based graphic designers around the world greatly outnumber those who use Mac computers.

Yes, it is true that Affinity Photo and Affinity Designer are great alternatives to Adobe Photoshop and Illustrator CC. However, Serif’s smallness means it is midget fighting against Juggernaut like Adobe. The delayed Windows versions of Affinity Photo and Affinity Designers means Serif doesn’t have enough money/manpower working on them. Unless Autodesk (ADSK) or Microsoft (MSFT) buys Serif, Affinity Photo and Affinity Designer will cater only to a small niche of Mac-using creative professionals.

I still believe that Adobe might also buy Serif and shutter down its Affinity Photo and Affinity Designer products. This is how Adobe bought rival design software make Macromedia in 2005 for $3.4 billion. Adobe then discontinued Macromedia’s Freehand vector drawing software to protect Adobe Illustrator. I think buying Serif will cost less than $100 million.

Conclusion

I am staying long on ADBE. This company has almost zero competition in creative/design software. The monthly/annual subscription model of Creative Cloud is very attractive to employed and freelance creative professionals. The $9.99/month subscription to Adobe Photoshop and Lightroom CC is cheap enough even for Filipino graphic artists/photographers like me.

Adobe Stock Forecast

As long as college students and trade school enrollees continue to get trained in Adobe-made software, Adobe Photoshop, Illustrator, Premiere, After Effects, and Dreamwever will continue to dominate the creative software industry. This is the invidious asset of Adobe. Its software products have become the industry standard for the education/training system. This is again because creative-related firms require their employees to be well-versed in Adobe software.

The last time I checked, there’s still no university, college, training centers, or vocational schools that offers diploma courses on Serif Affinity Photo and Affinity Designer.

Like it was in December 2015, my Buy recommendation for ADBE is again fortified by the near and long-term algorithmic forecasts of I Know First. I trust the deep learning computers of I Know First. You should too. If I Know First says Adobe is a buy, you do it because it will more often than not result in serious profit.

Adobe Stock Forecast

Past I Know First Forecast Successes with ADBE

I Know First has been bullish on Adobe in past forecasts. Since then, ADBE has been up almost 15% to date.

Adobe Stock Forecast

This forecast was sent out to I Know First subscribers December 16th, 2015. To subscribe now click here.


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