On Friday, Piper Sandler adjusted its price target for Adobe (NASDAQ:ADBE), reducing it slightly to $700 from the previous $705. The firm has kept its Overweight rating on the stock. This adjustment follows Adobe's release of financial results that showed a 15% increase in Annual Recurring Revenue and an 18% rise in EPS.
The company's performance was bolstered by stronger-than-anticipated enterprise demand, leading to a boost in Remaining Performance Obligations (RPO) growth and a $57 million revenue beat.
The tempered outlook for net new digital media ARR in the second quarter, projected at $440 million compared to $470 million in the same period last year, has cast a shadow over the solid results. Additionally, Adobe's decision not to revise its full-year guidance of $1.9 billion in net new DM ARR from the December forecast has sent mixed signals to investors. These factors contributed to a more than 10% after-market sell-off of Adobe shares.
Piper Sandler believes that the market reaction may be an overreaction, referring to it as a "self-inflicted flesh wound." The firm suggests that the recent announcement of a $25 billion stock buy-back program could alleviate investor concerns. In light of these developments and minor adjustments to growth expectations, Piper Sandler encourages growth investors to take advantage of the dip in Adobe's stock price before the upcoming Adobe Summit user conference scheduled for March 26-28, 2024.
The Adobe Summit is anticipated to provide further clarity and potentially a more coherent message regarding the company's future prospects and strategy. Piper Sandler's maintained Overweight rating indicates a continued positive outlook on Adobe's stock despite the minor reduction in the price target.
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