Computer software giant Adobe Systems (ADBE, Financial) announced its fourth-quarter results on Thursday, Dec. 13. Despite breaking corporate records for both quarterly and annual revenue, earnings fell short of Wall Street expectations.
The earnings miss sent the stock tumbling on Dec. 14 from $247.71 the previous day to $230. The stock has been struggling to recover ever since.
Share prices are hovering in the $212 range as of Dec. 21, but long term, Adobe may still be a good buy. Some investors are speculating that Adobe’s days of rapid growth are over, but the company’s cloud-centric services dispel this myth. There is still plenty of room for growth for the business cloud.
If you look closely at the company's results, you’ll see that business is still very good.
In the fourth quarter, Adobe brought in $678 million income, or $1.37 per share. Non-GAAP earnings were $1.83 per share on $2.46 billion in revenue. That figure is up 23% compared to the same period last year.
Adobe also acquired Marketo, a marketing automation firm, for $4.75 billion in October. The fourth-quarter report is the first since the acquisition.
The company’s Digital Media segment saw revenue growth of 23%. The segment includes Creative Cloud and the Document Cloud with its electronic signature feature. The Digital Experience segment saw revenue growth of 25%.
CEO Shantanu Narayen said the company made “significant investments” this year across its product portfolio. The company has also entered new markets and made some strategic acquisitions, according to Narayen, that will drive continued “top and bottom-line performance.”
Adobe has outperformed the market this year. The company still had a good quarter, even if the results were not as excellent as investors had expected. Expenses related to the Marketo acquisition may negatively impact earnings per share over the short term, but over the long term, it may prove to be a profitable acquisition.
The company’s guidance may have been disappointing, but Adobe has a reputation for being conservative in this department. It has outperformed APR targets by an average of 9.9% over the last nine quarters.
Many analysts agree that the decline of Adobe’s stock after its earnings release is a good opportunity to buy shares. For value-minded investors focused on short-term results, the stock’s hefty price tag may make it an unattractive option in the near term.
Disclosure: The author has no stakes in the listed equities.
