Adobe (ADBE, Financial) has faced several problems recently due to the slowdown of the growth of its Flash player. However, the stock has recovered most of its recent losses and is in an uptrend. Adobe still has many growth drivers that can help the stock sustain its upwards trajectory.
Digital Media segment is gaining momentum
Adobe carries on enhancing the product offerings to appeal to additional users. The company upgraded its video services in the last quarter as it added more than 100,000 intrinsic 4K video assets to its library at the Adobe Stock.
Adobe Stock is basically a portion of its Creative Cloud service which comprises more than 1 million video assets and around 45 million image and graphic media files. The company’s editing services and video production are progressively gaining momentum as many films are using Adobe Premiere Pro CC and several Creative Cloud tools.
Moreover, the company detailed that its revenue generated from digital media segment surged 33% year over year whereas its annualized recurring revenue escalated $246 million in the last quarter. The company's overall digital media ARR reached $3.13 billion. Due to this thrust, the company increased its digital media ARR growth mark for 2016 to $1 billion, a surge of $262 million equated to its previous target of $738 million, which could result in total of $4 billion digital media ARR exiting fiscal 2016.
Strong loud subscriber growth
In the last quarter, Adobe added an exciting 798,000 new Creative Cloud subscriptions, bringing overall Creative Cloud subscribers to approximately 6.97 million. Adobe’s effective implementation of its cloud and mobile strategy is the main reason behind the company’s strong performance. And these are not just prevailing consumers transferring from the company’s legacy perpetual license model. Furthermore, the company observed that around 30% of Creative Cloud subscribers are new to it, and to date approximately 23 million new Adobe IDs have been created via its mobile application.
The company also detailed that mobile applications are a great source due to which the new designers are getting interest in Adobe, and many of these users are willing to subscribe and download the company’s desktop applications. If this momentum continues, then the company will have a bright future ahead.
Conclusion
Given the momentum, I can see Adobe moving higher in the coming months. Despite the slowdown in Flash, the company has several other growth drivers that can help it sustain its uptrend.
Disclosure: I don't hold a position in any of the stocks mentioned in the article.
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