Adobe (NASDAQ: ADBE) is scheduled to report its fiscal Q4 2022 results on Thursday, December 15. We expect Adobe to edge past the consensus estimates of revenues, while earnings will remain in line with expectations. The company posted mixed results in the third quarter, with total revenues increasing by 13% y-o-y to $4.43 billion. It was driven by a 13% growth in digital media and a 14% rise in the digital experience segments. The above growth was due to an increase in net new users and an improvement in subscription-based revenues. We expect the fourth-quarter results to be on similar lines (Note – Adobe’s FY’21 ended on December 3, 2021. Q3 FY’22 refers to the quarter that ended on September 03, 2022).
Our forecast indicates that Adobe’s valuation is $368 per share, which is 9% above the current market price of just above $338. Our interactive dashboard analysis on Adobe’s Earnings Preview has more details.
(1) Revenues likely to beat the consensus estimates
Adobe’s revenues grew 12% y-o-y to $13.1 billion in the first nine months of FY 2022. The growth was primarily driven by a 12% rise in digital media and a 15% increase in the digital experience divisions.
- The digital media segment benefited from a 10% y-o-y rise in the creative cloud and a 22% growth in the document cloud categories over the first three quarters. Further, the segment’s annualized recurring revenue (“ARR”) – key performance metrics, improved by 10% to $13.4 billion. We expect the same trend to continue in the fourth quarter.
- The digital experience revenues grew 15% y-o-y to $3.3 billion in the first nine months. It was because of higher subscription-based revenues. We expect the same momentum to follow in the fourth quarter.
- Overall, we estimate Adobe’s revenues to touch $17.64 billion for FY 2022.
Trefis estimates Adobe’s fiscal Q4 2022 revenues to be around $4.56 billion, 1% above the $4.53 billion consensus estimate.
(2) EPS is expected to be in line with the consensus estimates
Adobe Q4 FY2022 adjusted earnings per share (Non-GAAP EPS) is expected to be $3.53 per Trefis analysis, which is at par with the consensus estimate of $3.50. The net income marginally decreased in the first nine months of 2022 to $3.58 billion, despite positive revenue growth. It was mainly due to higher operating expenses as a % of revenues. We expect the fourth-quarter results to follow the same trend. Further, we expect the annual GAAP EPS to be around $10.03 in FY2022.
(3) Stock price estimate is 9% higher than the current market price
We arrive at Adobe’s valuation, using an EPS estimate of around $10.03 and a P/E multiple of 37x in fiscal 2022. This translates into a price of $368, which is 9% above the current market price of around $338.
Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year
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