https://seekingalpha.com/article/4370960-why-adobe-soar-to-800While, according to the company's financial analyst meeting in 2019, Digital Experience has an about twice as high projected TAM, revenues for FY 2019 in the Digital Media segment were more than twice as high as in the Digital Experience segment.
Consequently, based on the company's TAM projections for both segments amounting to $128B for 2022, there is still an enormous growth potential from an operational point of view
Additionally, as can be seen from the figures for 2019, around 90% of Adobe's revenues consist of subscriptions, i.e. recurring revenues with high customer loyalty and stickiness.
Fifth, turning to Q2 2020 results, Adobe reported double-digit growth rates despite a very challenging market environment due to the global pandemic:
revenue grew by 14% year-over-year to $3.13B.
operating income grew by 35% year-over-year to $1B.
net income grew by 74% year-over-year to $1.1B (including $100 million benefit from income taxes).
diluted EPS grew by 76% year over year to $2.27.
operating cash flow grew by 7% year-over-year to $1.18B.....
Sixth, turning to guidance, the company expects $3.15B in revenue, representing a probably conservative double-digit year-over-year growth rate of 11%. Digital Media is expected to grow by 16%, whereas Digital Experience is expected to be flat.
... Advertising Cloud will not be an area of growth for now. While the elimination of these offerings will negatively impact revenue, it will improve overall margins.
Based on my fair value calculation, the stock has an upside potential of 70% and could be worth $808 per share. Which means that the stock still has upside potential left despite its recent rally.If you already own the stock, you may not want to chase the recent rally.
If you do not own Adobe yet, it should be at the top of your watchlist for the next market pullback.
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