Adobe Stock Slides as Analysts Cut Their Ratings for the Figma Purchase
Adobe was trading at $295.20 as of 12:51 PM EDT. on Friday.
Adobe (NASDAQ:ADBE) shares declined another 3% in Fridays pre-market trading.
In response to the software companys mixed forecast and $20 billion Figma transaction, numerous analysts reduced their recommendations.
On Thursday, Adobe (ADBE) also revealed the results of its third quarter and said that it would pay $20 billion to buy Figma, a developer of a collaborative design platform.
Analysis of Adobe stock
According to Oppenheimer analyst Brian Schwartz, Adobe overpaid for Figma, and he downgraded the companys rating from outperform to perform. The transaction adds another degree of execution risk over the next few quarters, Schwartz continued, and the hefty price tag shows it was a defensive measure.
Barclays lowered its price objective for the stock from $440 to $340 and downgraded the stock from overweight to equal-weight while adding that the Figma acquisition, with stocks funding half of the price, could delay EPS growth for a year. Additionally, the deal makes it difficult to argue for multiple expansion.
Despite calling the Figma acquisition a success, BofA Securities cautioned that it represents an overhang until deal closing and the value of such a substantial acquisition (14% of market cap) becomes more obvious. In addition, the bank downgraded Adobe (ADBE) to Neutral and decreased its PT from $450 to $350 due to deal uncertainties.
While keeping a Neutral rating, Credit Suisse decreased its PT from $425 to $350. Additionally, it updated its forecasts for the business, now anticipating FY2022/FY2023 revenue of $17.6B/19.7B and EPS of 13.62/15.94. Revenue and EPS were earlier projected to be $17.66B and $19.93B, respectively. Adobe (NASDAQ:ADBE) is rated as a Hold by SA Quant while a Buy by SA Authors. Over the past year, the value of the companys shares have decreased by 54%.
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Author: Jowi Kwasu
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