Last week, Adobe Systems Incorporated (ADBE) announced that it is acquiring Fotolia, a privately-held marketplace for royalty-free images and video. The acquisition news, combined with the release of Adobe’s fourth-quarter earnings, boosted the ADBE stock price on Friday.
With so much activity is now a good time to buy ADBE stock?
Adobe Systems Incorporated – Company Overview
Adobe Systems is a software company that operates in three segments: Digital Media, Digital Marketing and Print and Publishing. ADBE is most well-known for its digital creative suite, which includes Photoshop, InDesign and Dreamweaver.
Adobe operates worldwide and employs more than 11,800 employees. ADBE brought in over $4 billion in sales last year.
Adobe Systems Incorporated – Earnings Rundown
For the fourth quarter, Adobe reported adjusted earnings of 36 cents per share, beating consensus estimates of 30 cents per share. ADBE reached its target revenue of $1.07 billion, which works out to 12.5% earnings growth and 12.3% sales growth year over year. 66% of Adobe Systems’ revenue resulted from recurring sources, which was up from the same quarter last year.
Adobe repurchased 1.8 million shares during the quarter, returning $127 million to ADBE stockholders. For fiscal year 2014, Adobe’s reported $4.15 billion in revenue and generated $1.29 billion in operating cash flow.
Adobe Systems Incorporated – Current Ratings
Adobe had a very solid year. ADBE stock remained in “buy” territory for most of the year and only dropped to a “hold” rating after the major market selloff in October. However, Adobe quickly bounced back to a “buy” rating in November.
ADBE stock has solid buying pressure, earning a B for its Quantitative Grade. Meanwhile, Adobe Systems’ fundamentals could use some improvement. ADBE stock excels in earnings momentum, earning an A. However, ADBE stock’s other metrics are lackluster. Adobe outright fails when it comes to operating margin growth (F) and earns D-grades for earnings growth and sales growth. Meanwhile, earnings surprises, analyst earnings revisions and cash flow earn mediocre C-grades.
Overall, ADBE earns a C for its Fundamental Grade. As of this posting, Dec. 15, 2014, I consider Adobe a B-rated “cautious buy.” While ADBE reported solid fourth-quarter earnings, Adobe Systems’ fundamentals are still a bit shaky. I would monitor ADBE stock closely before diving in.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
