Adobe's Upside Is Already Priced In; BTIG Initiates At Neutral

Although Adobe Systems Incorporated (NASDAQ: ADBE) seems to be well-positioned to benefit from the ongoing shift from product-focused to experience-focused marketing and commerce, the company is still highly dependent on one offering, BTIG’s Abhinav Kapur said in a report. He initiated coverage of Adobe with a Neutral rating.

Adobe is a leader in enabling large enterprises to “manage their digital transformations via an end-to-end, closed-loop content creation and marketing platform,” analyst Kapur mentioned.

High Dependence On Content Creation

Although the digital marketing business is facing strong secular tailwinds, Adobe continues to be primarily “a content creation offering at its core,” Kapur noted. The Digital Media business contributes more than 60 percent of the company’s revenues, and growth is decelerating into the ~20 percent range.

Limited Upside In Shares

“We need to see evidence that the company can deliver Digital Media results well above Street expectations in order to unlock sufficient EPS expansion to drive the stock higher from current levels,” the analyst commented. He added that the positive sentiment from Adobe’s “well-managed transition to a subscription revenue base and compelling margin profile” appears to be priced into the company’s shares, and recommended waiting for a pullback to invest.

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