24 March 2021

Adobe Investors on Cloud Nine After Earnings Call

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the markets today

     

What’s happening: Adobe Inc. reported stronger-than-expected results for its fiscal first quarter and boosted its forecast for the year.

What happened: Adobe’s creative software applications continued to deliver robust growth, quelling concerns around a decline in the use of digital tools as people gradually return to working from the office.

The company’s stock remained broadly flat, however, in after-hours trading, despite the upbeat earnings call.

How were the results: The San Jose, California-based company reported growth in revenues and profits for the fiscal first quarter, with both metrics exceeding market views.

  • Revenues grew 26% year-over-year to $3.91 billion, beating the consensus estimate of $3.76 billion.
  • On a GAAP basis, Adobe earned $2.61 per share, up 33% from the same quarter last year.
  • Adjusted profits came in at $3.14 per share, convincingly surpassing market expectations of $2.78 per share.

Why it matters: Revenues from the company’s digital media unit soared 32% to $2.86 billion last quarter, while digital experience sales grew 24% to $934 million. The results from both units exceeded expectations.

“Adobe’s Creative Cloud, Document Cloud and Experience Cloud have become mission critical to all customer segments - from students to individuals to large enterprises - across the world,” CEO Shantanu Narayen said.

Adobe has been taking new initiatives to keep growing its revenues. In October last year, Adobe had launched its Illustrator app for the Apple iPad in a bid to expand its offering to more devices. The company expects its new creative software tools to help deliver revenue growth in the current quarter.

As part of its efforts to strengthen its Experience Cloud segment, Adobe announced plans to acquire Workfront, a cloud-based project management platform, for $1.5 billion.

Management issued strong forecast for the current quarter, projecting adjusted earnings of $2.81 per share on sales of $3.72 billion. The guidance came in higher than the consensus estimates of earnings of $2.70 per share on sales of $3.7 billion.

The company also raised its sales and adjusted earnings guidance for fiscal 2021 from $15.15 billion to $15.45 billion and from $11.20 per share to $11.85 per share, respectively.

How shares responded: Adobe’s shares dipped slightly by 0.04% to $460.00 in after-hours trading, after adding 1.7% during the regular session.

What to watch: Investors will keep an eye on the performance of Adobe’s cloud business as the global economy reopens. With CFO John Murphy due to retire sometime this year, markets look forward to the company naming his successor.

The Markets Today

     

US stocks will be in focus today, ahead of a basket of economic reports.

Context: US stocks closed lower on Tuesday, with travel and retail shares coming under pressure amid renewed covid-19 restrictions globally.

Details: The World Health Organization reported that several regions around the world was experiencing a rise in daily covid-19 cases, with new variants of the virus spreading rapidly.

Germany announced plans to extend restrictions until April 18, while France initiated another lockdown.

Travel and retail stocks plunged on fears of fresh restrictions globally. Shares of Carnival, Norwegian Cruise Lines, American Airlines and United Airlines fell more than 6% on Tuesday.

Tuesday marked the one-year anniversary of the coronavirus-induced market bottom, which had sent the S&P 500 lower by 30% in around three weeks. The US stock market has recovered sharply since then. The S&P 500 has gained around 80% from the record low last year and the Dow Jones index had added about 75% in the same period.

The S&P 500 lost 0.8% to close at 3,910.52 on Tuesday, following a decline in industrials and materials shares. The Dow Jones index lost 308.05 points to reach 32,423.15, with Caterpillar’s stock down by more than 3%. The tech-heavy Nasdaq 100 fell 0.53% to settle at 13,017.79.

What to watch: Markets await economic data on durable goods orders, composite PMI, manufacturing PMI and services PMI from the US. New orders for manufactured durable goods, which rose 3.4% in January, are expected to grow 0.8% in February. The IHS Markit US Services PMI is projected to improve to 60 in March, from February’s reading of 59.8, while the manufacturing index is expected to rise to 59.3, from a reading of 58.6 last month.

Investors will also keep an eye on the testimony from Federal Reserve Chair Jerome Powell. Rising covid-19 cases remain one of the top concerns for markets, with total infections surging past 29.9 million in the US.

Other Markets: European trading indices closed mostly lower on Tuesday, with the FTSE 100, French 40 and STOXX Europe 600 down by 0.40%, 0.39% and 0.20%, respectively. However, the German DAX 30 rose slightly by 0.03%.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Turkey’s consumer confidence index, UK’s inflation rate, producer prices, retail price index, manufacturing PMI, services PMI and composite PMI, Eurozone’s manufacturing PMI, services PMI, composite PMI, consumer confidence indicator and European Central Bank’s non-monetary policy meeting, South Africa’s inflation rate, France’s manufacturing PMI, services PMI and composite PMI, Germany’s manufacturing PMI, services PMI and composite PMI, Mexico’s unemployment rate as well as the US MBA mortgage applications and EIA’s crude oil stocks.

 

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