Analyst Note| Dan Romanoff, CPA |
Wide-moat Adobe reported strong second-quarter results, including upside to guidance for revenue and non-GAAP EPS, and provided a better-than-expected third-quarter outlook. Management did not raise full-year guidance but was enthusiastic about exceeding its previously issued 2021 outlook. We see strength in all segments and all geographies regarding quarterly results and are pleased to see continued strength in the digital experience, or DX, segment. SMB performance is back to prepandemic levels in the U.S. and improving globally as well. We think results continue to support our investment case that Adobe will continue to dominate the creative segment, and its well-rounded portfolio, including Magento and Marketo, positions the firm as a digital marketing leader. Given results and guidance, we are raising our fair value estimate to $569 per share from $520. Given the stock’s run year to date, we see shares as fairly valued.