Earnings Calendar: One S&P 500 Giant Will Report its Quarterly Results This Month
June 08 2021 - 6:13AM
Finscreener.org
Tech giant Adobe Inc.
(NASDAQ: ADBE) will
be announcing its quarterly results next week on June 17, according
to its earnings
calendar. It will be the company’s second quarter of fiscal
2021 results that ended in May. Adobe is part of the
S&P 500 Index and has been one of the top performers
here.
In the last 10-years, shares of ADBE stock
have surged 1,450%. It means an investment of $1,000 in Adobe stock
in June 2011 would have ballooned to around $15,000 today. In this
period the S&P 500 has surged 300%.
However, in 2021, ADBE stock has
underperformed the S&P 500. While the index has gained 13.4%
year to date, Adobe shares have gained less than 1%. The next key
driver of Adobe’s shares will be its upcoming results and let’s see
what Wall Street expects from the company.
Adobe forecast to grow sales by 17.9%
in Q2
In the second quarter of fiscal 2021, Adobe
is forecast to grow its sales by 17.9% year over year to $3.73
billion, up from $3.16 billion in Q2 of 2020. Comparatively, its
adjusted earnings per share are expected to rise by 14.7% from
$2.45 per share to $2.81 per share in this period.
For fiscal 2021, Wall Street expects Adobe to
increase sales by 20% to $15.47 billion from $12.87 billion. Its
adjusted EPS is forecast to grow by 17.4% to $11.86 in
2021.
In case, Adobe surpasses consensus estimates
in Q2 and provides better-than-expected guidance for fiscal 2021,
investors can expect its stock to gain pace and move higher.
Investors should also note that the company has beaten consensus
earnings estimates in each of the last eight quarters.
Adobe operates as a diversified software
company. Its Digital Media segment provides tools and solutions
that enable users to create, publish and monetize their digital
content. Its flagship product is Creative Cloud which is a
subscription service that allows users to download and access the
latest suite of products.
Its Digital Experience segment offers
products and solutions for creating, managing, and monetizing
customer experiences from analytics to commerce. Adobe also has a
Publishing and Advertisement business that offers e-learning
solutions, technical document publishing, web application
development, and other solutions.
Adobe gaining market
share
Adobe has established itself as one of the
leaders in the creativity software market. This vertical is rapidly
expanding and according to Adobe’s management, its total
addressable market might increase from $83 billion in 2020 to $147
billion in 2023, increasing at an annual rate of 23% year over
year.
One of the key drivers of this growth is the
growing enterprise adoption of digital solutions. One report from
market research company IDC Corp. estimates digital transformation
spending to touch $6.8 trillion between 2020 and 2023, giving Adobe
enough room to grow top-line in the future.
Historically, Adobe has managed to increase
its revenue at a faster rate compared to its total market
opportunity. It has successfully gained market share in multiple
verticals and is poised to replicate its performance going forward
as well.
Another interesting aspect that investors
should note is that Adobe’s free cash flow is growing at a faster
pace compared to its revenue, which is an indicator of rising
profit margins. This trend can be attributed to rising recurring
sales.
In fiscal 2015, around 67% of total Adobe
sales were from subscription sales and this number surged to 90% in
fiscal 2020. It allowed the company to improve its gross margin to
87% from 84% while operating margin rose from 19% to 33% in this
period.
Further, Adobe has successfully managed to
increase enterprise spending over the years. Approximately 61% of
its top 100 customers used
three or more ADBE products back in 2015. Now, 93% of its
customers use more than three products on its platform lowering
acquisition costs.
Will ADBE stock beat the S&P
500?
We can see that ADBE stock is trading at a
forward price to sales multiple of 15.6x and a price to sales
multiple of 43x which is extremely steep. However, growth stocks
command a premium valuation. While Adobe may be vulnerable in a
broader market sell-off, every correction should be viewed as a
buying opportunity given the company’s stellar growth estimates and
multiple secular tailwinds.
Analysts covering ADBE stock have a 12-month
average
price target of $571 which is 12.4% above its current trading
price.
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