How do you shock investors into a two day selling frenzy when you just released great earnings? Answer, by announcing a cash and stock acquisition paying 20X sales for a company with $400 million ARR in revenues, and doing it a day ahead of scheduled earnings to cause a market sell-off. Adobe has mastered the faceplant for its investors. The Q3 performance was overshadowed by the acquisition of Figma. While its latest earnings performance was impressive, growth momentum is clearly slowing as evidenced by the 12.6% top line growth for Q3 2022. The strong U.S. dollar was a drag on the company's results. Despite revenues hitting all-time highs, investors are more concerned about the acquisition of Figma signalling that it could be a defensive play. After the stock collapse, investors were surprised by the news. Is this a great buying opportunity or the beginning of a painful valuation reset for Adobe shares?
MarketBeat.com - MarketBeat Adobe released its results for the third quarter of its fiscal year on September 15th. The company reported earnings per share of $3.40, which was $0.06 better than the analysts' estimates. The revenue grew to $4.43 billion, missing analyst estimates for $4.44 billion. The digital media segment grew in constant currency. Document Cloud revenues grew 23% or 25% in constant currency, to $600 million. The company offered mixed Q4 guidance with earnings per share expected to be $3.50 compared to analyst estimates of $3.47 and revenues of $4.52 billion compared to $4.7 billion analyst estimates. Adobe has a track record of creating and leading categories and consistent execution and delivered another record quarter. We believe we have a chance to create a new era of collaborative creativity with the announcement of our intent to acquire Figma.
Cash and stock will make up the majority of the acquisition. If needed, cash on hand will be used. More than six million restricted stock units will be given to Figma's employees after they close. The deal is expected to close in three years. Adobe expects the deal to be dilutive to non- GAAP earnings for two years after closing and breakeven in year three.
A near-term interpretation of the price action is provided by using the rifle charts on the weekly and daily time frames. In June, the weekly rifle chart made a swing low. After sliding into earnings, shares rebounded up to $450.15. The weekly downtrend began on the 5-period MA at $373.70 and continued down through the weekly 15-period MA at $389.32 as shares collapsed through the weekly lower Bollinger Bands. The week's sell-off accelerated to the 40- band. The weekly market structure low was the cause of the collapse of shares. The 5-period MA crossed the 15- period MA down at $367.65 as it overshot the daily lowerBBs. The 20 band was tested by the daily stochastic. The attractive levels for long-term investors are $300.25 fib, $289.09 fib, $269.80, $257.14 fib, and $241.25 fib.
It makes sense for Adobe to acquire a collaborative design platform. Paying irrationally exuberance, ZIRP, raging all-time high bull market, internet mania prices in a technology bear market, and devastating foreign exchange headwinds are all signs of desperation. The deal adds execution risk, shareholder dilution, overhang, and underscores an overpriced defensive move from Adobe was the reason for the price target cuts.
Does Adobe have desperation before the lights go on, or do they see an opportunity that the market ignores? One of the first major developers to switch to a software-as-a-service model through the cloud was Adobe. You would buy and own software for $600-$700 and pay for upgraded versions for the rest of your life. It was accessible for professionals but not for consumers. The low-priced cloud subscription model made it possible for the general public to have access to the software. Adobe's journey from $22 per share to nearly $700 per share can be traced back to the introduction of cloud computing. The current CEO of Adobe has been with the company since 1998 and became CEO in 2007.
Some of the largest publicly traded companies founded and run by entrepreneurs are tracked by the entrepreneur index.
There is a Dermatologist who wants to save you money.
Your employees want this perk and you can improve your bottom line by giving it to them.
There are hidden dangers of not taking your vacation days.
After 9/11, this family-owned jewelry shop struggled to rebuild. Two sisters who run a 46-year-old business reveal what it takes to thrive.
There are businesses that need more women investors. There is a way that that can happen.
Franchising is not for entrepreneurs.
A former Disney executive shared her 5 most valuable leadership tips on a social networking site.
All Rights Reserved © 2024
