Citi Still Likes Adobe Shares Following Q2 Results

Adobe Systems Incorporated (NASDAQ: ADBE) reported its 2Q16 results, with the annualized recurring revenue (ARR) in line with the estimate.

Citi’s Walter H. Pritchard maintains a Buy rating on the company, while raising the price target from $114 to $117.

2Q16 Results

The ARR for 2Q16 drove in-line reported digital media revenue, as well as upside to digital marketing, with subscriptions and perpetual mix continued to rebound.

Adobe Systems reported its EPS for the quarter at $0.71, ahead of the consensus and the estimate, driven by higher-than-estimated revenue and lower-than-consensus operating expenses.

“Disclosure and commentary on the call suggests Digital Media tracked inline to better than metrics we have implied in subs/ARPU,” Pritchard mentioned.

Related Link: JPMorgan Wanted More From Adobe

Guidance

The analyst pointed out that trends have remained robust following the guidance raise in Q1. The company had raised the FY16 ARR guidance after the 1Q results.

The ARR remained on a higher trajectory, with “balanced performance” within Digital Media.

Management expects ARR to rise by $285 million in 3Q16, ahead of the estimate of $250 million.

In addition, Adobe Systems guided to 3Q16 revenue of $1.42–$1.47 billion, with the high-end of the guidance in line with the consensus and the midpoint in line with the estimate.

“Overall, with ADBE continuing to execute and macro headwinds not dragging the business down,” Pritchard added.