Why Adobe Systems Incorporated Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of diversified software company Adobe Systems Incorporated (NASDAQ: ADBE  ) popped 10% today after its quarterly results impressed Wall Street.

So what: Adobe's Q4 results -- profit sank 70% on a revenue decline of 10% -- and current-quarter guidance missed analyst estimates, but whopping subscription growth reinforces optimism over the company's longer-term prospects. In fact, subscription-based revenue spiked 85% as Adobe added 402,000 Creative Cloud subscribers, up from the gain of 331,000 in Q3, suggesting that its cloud momentum isn't about to slow anytime soon.  

Now what: Management now sees Q4 EPS of $0.22-$0.28 on revenue of $950 million-$1 billion, versus the consensus estimate of $0.33 and $1.02 billion. "Creative Cloud and Adobe Marketing Cloud are the clear market leaders and are poised for accelerated growth," said President and CEO Shantanu Narayen. "As a result, we are well-positioned to begin returning value to shareholders while continuing to focus on design wins and further invest in our business and our next-generation products." With the stock surging to another 52-week high today and trading at a forward P/E around 30, however, much of that bullishness might already be baked into the price. 

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Related Tickers

9/27/2016 2:59 PM
ADBE $109.54 Up +2.28 +2.13%
Adobe Systems CAPS Rating: **