How Did Adobe’s Stock Reach an All-Time High?
Adobe’s stock surges 7% after fiscal 3Q16 results
So far in this series, we’ve looked at Adobe Systems’ (ADBE) recently announced fiscal 3Q16 results. We also discussed the company’s operating segment performance, margins, cash, debt, cash flow, and other factors that contributed to Adobe’s continued improved performance in 3Q16.
The increased contribution of subscriptions towards Adobe’s overall revenue demonstrated the success of the company’s switch to a web-based subscription model from traditional licensed software. Earlier in this series, we learned that subscription revenue grew 41% in 3Q16. A sustained increase in cloud momentum helped Adobe beat analysts’ 3Q16 expectations.
Fiscal 3Q16 marked the fifth consecutive quarter of at least 20% YoY (year-over-year) revenue growth for Adobe. Adobe’s guidance for fiscal 4Q16 and fiscal 2016 also exceeded analysts’ expectations, which contributed positively to the market sentiment on Adobe’ stock. As a result, Adobe’s stock rose more than 7% in after-hours trading on September 20, 2016.
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Adobe’s stock continues to move upward
Adobe’s stock has risen consistently in the last two to three years. In early May 2016, Adobe stock hit its all-time high of $100.56. In the last year, the stock has risen more than 33%.
The stock’s successful runs in 2015 and 2016 could be attributed to the company’s subscription business model, which led to more predictable recurring revenue. FireEye (FEYE), Fortinet (FTNT), Palo Alto Networks (PANW), and Salesforce (CRM) are some leading players in the technology space. Most of their revenues are recurring.
Fiscal 3Q16 expectations
For fiscal 4Q16, Adobe expects its revenue and EPS (earnings per share) to be $1.55 billion–$1.6 billion and $0.82–$0.89, respectively. Analysts expect Adobe to have $1.57 billion in revenue and $0.78 in EPS, respectively, in fiscal 4Q16.
For fiscal 2016, Adobe expects its revenue and EPS to be $5.8 billion–$5.85 billion and $2.94–$3, respectively. Analysts expect Adobe to have $5.81 billion in revenue and $2.87 in EPS, respectively, in fiscal 2016.