Adobe Heads for $34 on Digital Media and Marketing Drive
Adobe released its Q4 FY12 earnings on December 15, posting another billion dollar quarter. This has been its best quarter to date with revenues of $1.152 billion, a 14% increase year-over-year. Adobe has been focusing on its digital media and digital marketing businesses in the last quarter, and it seems like its efforts have paid off. Adobe competes with Apple (NASDAQ:AAPL), Quark and Corel in creative software, and offerings like Google‘s (NASDAQ:GOOG) Analytics in web analytics and marketing.
We have a $34 Trefis price estimate for Adobe, which stands nearly 25% above its current market price.
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Shantanu Narayen, president and CEO of Adobe stated: [1]
Adobe’s record results in Q4 and fiscal 2011 were driven by strong performance in our digital media and digital marketing businesses. We intend to be the market leader in these two large categories, which will drive strong revenue and earnings growth
Creative Software and Digital Media to Drive Revenue Growth
2011 was a crucial year for Adobe’s digital media business. It launched Creative Suite 5.5, which saw strong sales and also introduced HTML 5 development tools like Edge and Muse, which will drive its revenue going forward. Adobe also made quite few acquisitions like PhoneGap and Typekit, which will help improve its creative offerings.
It also launched Creative Cloud, and we expect its new Creative tablet apps could become a major revenue growth driver going forward as tablet usage increases in the consumer and enterprise segment.
Creative Software and Digital Media account for nearly 50% of Adobe’s Trefis price estimate. We expect strong sales in this segment going forward.
Digital Marketing Business Expected to Grow Rapidly
We expect Adobe’s digital marketing and web analytics business to grow at a steady rate throughout the forecast period. Adobe has launched new services like SocialAnalytics to add more value to its SiteCatalyst offering.
Earlier this year the company acquired Efficient Frontier, which offers digital ad buying and optimization solutions. This purchase will bring various new features like multi-channel ad campaign forecasting, execution and optimization as well as advanced social ad buying and optimization features for Facebook to Adobe’s current offering. Efficient Frontier also brings a social marketing and analytics platform, allowing brands to engage with their customers on social networks.
We expect digital marketing and analytics to reach a $1 billion revenue run rate by the end of the forecast period. Web Analytics and Digital Marketing accounts for nearly 9% of Adobe’s Trefis price estimate.
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Notes:- Adobe Systems’ CEO Discusses Q4 2011 Results – Earnings Call Transcript, Seeking Alpha [↩]