Adobe Price Target Raised To $103 At Bernstein: Here's Why

In a report published Monday, Bernstein analyst Mark L. Moerdler maintained an Outperform rating on Adobe Systems Incorporated (NASDAQ: ADBE), while raising the price target from $93 to $103. The company completed the acquisition of online multimedia marketplace, Fotolia, in Q1, while launching its own multimedia marketplace, Adobe Stock, on June 16.

Adobe Stock offers "Creative Cloud users the ability to buy and sell images through a cloud-based exchange that is directly integrated into Adobe's Creative Cloud tools for a flat fee per image or through a subscription to the Adobe Stock service. Non-Creative Cloud users can also take advantage of the service but at a higher price," Moerdler stated.

The analyst expects Fotolia and Adobe Stock to be able to generate incremental new revenue for the company, anywhere between $400 million and $1 billion by FY17, depending on Creative Cloud subscriber growth and the cross-sell attach rates. This represents meaningful value creation from the FY15 levels.

"We believe that consensus estimates for Adobe do not include the revenue and EPS that we expect could be generated by this new service, even at the lower end of our ranges, and this new service could offer significant upside to the story," Moerdler said, adding, "Since this is a new service, its adoption rate is still unknown, and management has not yet guided to the opportunity."

The analyst expects Adobe to be able to capture substantial market share in the stock images/content market, especially given the "obvious synergies" that have been created due to the combination of "Adobe's creative content development tools with a marketplace for exchanging the input and output for these tools."