Adobe stock watch: Why analysts see a 13% sales growth in Q3

• Adobe's share price rallied as much as 20% since July
• Analysts see further stock upside, thanks to growing telecommuting trend
• Wall Street is predicting a 13% revenue bump, due to be reported later today

US software company Adobe (NASDAQ: ADBE) is scheduled to report results for the third quarter of fiscal 2021 at 17:00 ET on Tuesday 15 September 2020.

Below, we highlight three key stock fundamentals that investors should consider ahead of Adobe’s upcoming earnings report.

Adobe stock is up 9% since July 2020

The Adobe stock has rallied as much as 20% since the start of July 2020, as demand for digital tools and services increased amid the Covid-19 pandemic.

A growing trend of working from home during this period, according to analysts, has also driven demand for Adobe’s Acrobat and Sign offerings. This has, in turn, boosted the stock.

Shares peaked at an all-time high of US$537 on the IG platform on 02 September 2020.

In the last two weeks, however, the stock has fallen roughly 14%, as the market went into correction mode on tech companies just ahead of Labour Day weekend in the US.

The NASDAQ-100 Technology Sector index, which tracks tech securities listed on the main NASDAQ-100 index, fell 11% during a massive sell-off that last four days.

Adobe is trading at US$489 a share as at the close of Monday 14 September 2020.

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Adobe rated ‘buy’ by Wall Street

Across the board, Adobe currently has a majority rating of ‘buy’ from 18 out of 28 Wall Street brokers polled by Bloomberg.

The stock has also received an average 12-month share price target of S$500.95 per share, as of 14 September 2020.

This represents a small upside of 2.4% from the last traded price, indicating that the stock is trading close to its peak market value.

In terms of specific price estimates, Jefferies was the most optimistic of the lot, rating the stock a ‘buy’ alongside a target price of US$570.

Cowen analysts are also equally bullish on Adobe, raising their price target from US$400 to US$550, and rating from ‘market perform’ to ‘outperform’ in their latest note posted on 11 September 2020.

‘A mix of growth, profitability, market leadership and sustainable competitive advantage make ADBE an attractive stock for a wide variety of investors,’ the analysts wrote.

On the other hand, Bernstein brokers were much more bearish on the price outlook, setting their target at US$424 a share. However, they rated the stock ‘outperform’.

For now, 98% of all opened IG client accounts on the Adobe counter currently hold a ‘long’ (buy) position, indicating an expectation for price to increase.

Adobe’s Q3 2020 sales expected to grow 13%

Analysts polled by Bloomberg are expecting adjusted non-GAAP earning per share (EPS) to come in at US$2.41 against a revenue of US$3.156 billion for the productivity solutions provider’s Q3 2020.

The projected revenue, if realised, would represent a 12.7% year-on-year increase and a smaller increase of 2% from the last quarter (Q2 2020).

Bloomberg Intelligence analysts say Adobe could see accelerated adoption of its digital cloud services in its Q3 earnings, as more enterprises and consumers embrace electronics documents to conduct business.

It is also worth noting that Adobe’s adjusted EPS and sales have beaten Bloomberg estimates in seven of its last eight reporting quarters.

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1. Create a live or demo IG Trading Account, or log in to your existing account
2. Enter <Adobe Systems Inc> in the search bar and select the instrument
3. Choose your position size
4. Click on ‘buy’ or ‘sell’ in the deal ticket
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