Adobe (ADBE:NSD) stock crashes after the Figma acquisition goes through for $20 Billion

Adobe made the announcement on Thursday that it will purchase Figma, a company that specializes in design tools, in a transaction that will be valued at approximately $20 billion in cash and equity – Adobe stock dropped by 17%, marking its worst drop since the year 2010.

Adobe made the announcement on Thursday that it will purchase Figma, a company that specializes in design tools, in a transaction that will be valued at approximately $20 billion in cash and equity – Adobe stock dropped by 17%, marking its worst drop since the year 2010.

Figma is a cloud-based design software company that was established in 2012. Their products enable teams to interact in real time. It is directly in competition with the XD programme that Adobe offers.

Design entrepreneurs Dylan Field and Evan Wallace founded the design business Figma with the intention of competing with Adobe’s Photoshop. After Adobe made the announcement that it will purchase Figma for a total of $20 billion in cash and shares, these individuals are now billionaires as a result of the transaction.

During the most recent investment round, which took place in 2021, the firm was estimated to be worth $10 billion.

According to sources familiar with the business’s financials who spoke with CNBC in the past, Figma is expected to produce more than $400 million in annual recurring income this year. Index Ventures, Greylock Partners, and Kleiner Perkins are among the companies that have invested in the company. Adobe has announced that Figma’s annual recurring revenue would exceed $400 million by the time the company exits 2022.

This transaction will result in a value that is twice as high as the one that the San Francisco-based business attained in June 2021, when it secured a total of $200 million from investors including Morgan Stanley and Durable Capital. According to estimates provided by Forbes, both Field and Wallace own a 10% share in the company, which would imply that the business is currently worth $2 billion.

It has been said that Figma is the Google Docs or GitHub of the design world since it has amassed a user base in the millions of designers who are willing to pay anything from $12 to $45 per editor for its digital whiteboard product.

Before unveiling browser-based tools that enable software designers to collaborate in real time with one another, Figma operated in secret mode for a number of years. Its solutions make it possible for groups of people to work together without having to go through the cumbersome and time-consuming process of saving and transferring their work to other people via a variety of different apps.

During the pandemic, the company that is currently run by co-founder Dylan Field noticed an increase in demand due to the growing popularity of working from home. According to the company’s website, some of its customers include Airbnb Inc., Google Inc., Netflix Inc., and Twitter Inc. The venture capital companies Kleiner Perkins, Index Ventures, and Greylock Partners are among those that have invested in Figma.

Adobe, which has been a favourite on Wall Street for more than a decade, has been pounded in the IT downturn, as seen by the fact that its shares have lost more than a third of their value since the beginning of the year. As a result of the growing scepticism among investors regarding the preeminent position held by Adobe’s creative software, the business has been exploring the possibility of expanding into consumer-friendly product categories.

Adobe has stated that it plans to include some of the capabilities found in its other products, such as drawing, photography, and video technologies, onto the Figma platform. Photoshop, Illustrator, Premiere Pro, and a variety of other Adobe applications are among the professional-level software products that may be purchased from Adobe.

Dylan Field, co-founder of Figma and current CEO, will continue to serve in both roles after the transaction is finalised. He will be responsible for reporting to David Wadhwani, the president of the digital media business of Adobe.

Since Adobe purchased the marketing automation software company Marketo in September 2018 for $4.75 billion, this transaction is the company’s largest acquisition to date. In August of 2021, Adobe completed its most recent significant acquisition by paying $1.2 billion to acquire Frame.io, a maker of collaborative video editing and review software.

Adobe also reported its financial results for the fiscal third quarter. Adjusted earnings per share came in at $3.40, which was higher than the consensus expectation of $3.33 per share from Refinitiv. Revenue of $4.43 billion was reported, which was in line with projections made by analysts for revenue of $4.43 billion.

The average price goal for Adobe stock over the next year, according to the projections of 25 different analysts, is USD 490.14. These projections are based on the stock of Adobe Systems Incorporated. Strong Buy is the recommendation that is held by the majority of industry analysts for Adobe Systems Incorporated. Based on 9 positive signals and 4 negative signals, Stock Target Advisor‘s own stock analysis of Adobe Systems Incorporated is Slightly Bullish. This conclusion was reached after considering both sets of data. The price of a share of Adobe Systems Incorporated’s stock was USD 309.13 as of the most recent market close. The share price of Adobe Systems Incorporated has decreased by -19.42% over the course of the past week, -31.46% over the course of the past month, and -53.24% over the course of the previous year.

Adobe Inc. (ADBE:NSD) Analysts with a Strong Buy rating, $496 target

Oppenheimer Holdings downgrades Adobe Inc. to perform
STA Research maintains the Buy rating at $435
Citigroup raises the rating to Neutral, target up from $380 to $388

Adobe Systems Incorporated Stock Analysis:

Based on the Adobe Systems Incorporated stock forecasts from 25 analysts, the average analyst target price for Adobe Systems Incorporated is USD 496.35 over the next 12 months. Adobe Systems Incorporated’s average analyst rating is Strong Buy. Stock Target Advisor’s own stock analysis of Adobe Systems Incorporated is Slightly Bullish , which is based on 9 positive signals and 4 negative signals. At the last closing, Adobe Systems Incorporated’s stock price was USD 371.52Adobe Systems Incorporated’s stock price has changed by -2.16% over the past week, -16.64% over the past month and -42.40% over the last year.

Adobe Systems Incorporated stock forecasts from 27 Crowd analysts, has the average Crowd target price for Adobe Systems Incorporated at US 606.78 over the next 12 month period.

 

About Adobe Systems Incorporated (ADBE:NSD)

Adobe Inc. operates as a diversified software company worldwide. It operates through three segments: Digital Media, Digital Experience, and Publishing and Advertising. The Digital Media segment offers products, services, and solutions that enable individuals, teams, and enterprises to create, publish, and promote content; and Document Cloud, a unified cloud-based document services platform. Its flagship product is Creative Cloud, a subscription service that allows members to access its creative products. This segment serves content creators, workers, marketers, educators, enthusiasts, communicators, and consumers. The Digital Experience segment provides an integrated platform and set of applications and services that enable brands and businesses to create, manage, execute, measure, monetize, and optimize customer experiences from analytics to commerce. This segment serves marketers, advertisers, agencies, publishers, merchandisers, merchants, web analysts, data scientists, developers, and executives across the C-suite. The Publishing and Advertising segment offers products and services, such as e-learning solutions, technical document publishing, web conferencing, document and forms platform, web application development, and high-end printing, as well as Advertising Cloud offerings. The company offers its products and services directly to enterprise customers through its sales force and local field offices, as well as to end users through app stores and through its website at adobe.com. It also distributes products and services through a network of distributors, value-added resellers, systems integrators, software vendors and developers, retailers, and original equipment manufacturers. The company was formerly known as Adobe Systems Incorporated and changed its name to Adobe Inc. in October 2018. Adobe Inc. was founded in 1982 and is headquartered in San Jose, California.

 

 

Most Recent Analyst Ratings for ADBE’s stock:

 

 

What we like:

High market capitalization

This is one of the largest entities in its sector and is among the top quartile. Such companies tend to be more stable.

Superior risk adjusted returns

This stock has performed well, on a risk adjusted basis, compared to its sector peers(for a hold period of at least 12 months) and is in the top quartile.

Superior return on equity

The company management has delivered better return on equity in the most recent 4 quarters than its peers, placing it in the top quartile.

Superior capital utilization

The company management has delivered better return on invested capital in the most recent 4 quarters than its peers, placing it in the top quartile.

Superior return on assets

The company management has delivered better return on assets in the most recent 4 quarters than its peers, placing it in the top quartile.

Positive cash flow

The company had positive total cash flow in the most recent four quarters.

Positive free cash flow

The company had positive total free cash flow in the most recent four quarters.

Superior Earnings Growth

This stock has shown top quartile earnings growth in the previous 5 years compared to its sector.

High Gross Profit to Asset Ratio

This stock is in the top quartile compared to its peers on Gross Profit to Asset Ratio. This is a popular measure among value investors for showing superior returns in the long run.

 

What we don’t like:

Overpriced compared to earnings

The stock is trading high compared to its peers on a price to earning basis and is above the sector median.

Overpriced compared to book value

The stock is trading high compared to its peers median on a price to book value basis.

Overpriced on cashflow basis

The stock is trading high compared to its peers on a price to cash flow basis. It is priced above the median for its sectors. Proceed with caution if you are considering to buy.

Overpriced on free cash flow basis

The stock is trading high compared to its peers on a price to free cash flow basis. It is priced above the median for its sectors. Proceed with caution if you are considering to buy.

Analysts rate Adobe Systems Incorporated (ADBE:NSD) with a Strong Buy rating and a $506.02 target

KGI Securities initiates Adobe Systems Incorporated with a Neutral rating
STA Research maintains the Buy rating at a $430 target

Based on the Adobe Systems Incorporated ADBE stock forecast from 25 analysts, the average analyst target price for Adobe stock is USD 506.02 over the next 12 months. Adobe stock’s average analyst rating is Strong Buy. Stock Target Advisor’s own stock analysis of Adobe Systems Incorporated is Slightly Bullish, which is based on 9 positive signals and 4 negative signals. At the last closing, ADBE target price was USD 368.14. ADBE stock price has changed by -12.88% over the past week, -41.82% over the past month and -44.77% over the last year.

About Adobe Systems Incorporated (ADBE:NSD)

Worldwide, Adobe Inc. operates as a diverse software corporation. Digital Media, Digital Experience, and Publishing and Advertising make up its three operating segments. In October 2018, the business changed its name from Adobe Systems Incorporated to Adobe Inc. Incorporated in 1982, Adobe Inc. has its corporate headquarters in San Jose, California. the following address: 345 Park Avenue, San Jose, California, 95110-2704

 

What we like:

High market capitalization

This is one of the largest entities in its sector and is among the top quartile. Such companies tend to be more stable.

Superior risk-adjusted returns

Adobe stock has performed well, on a risk-adjusted basis, compared to its sector peers (for a hold period of at least 12 months) and is in the top quartile.

Superior return on equity

The company management has delivered a better return on equity in the most recent 4 quarters than its peers, placing it in the top quartile.

Superior capital utilization

The company management has delivered a better return on invested capital in the most recent 4 quarters than its peers, placing it in the top quartile.

Superior return on assets

The company management has delivered a better return on assets in the most recent 4 quarters than its peers, placing it in the top quartile.

Positive cash flow

Adobe stock had positive total cash flow in the most recent four quarters.

Positive free cash flow

The company had positive total free cash flow in the most recent four quarters.

Superior Earnings Growth

Adobe stock has shown top quartile earnings growth compared to its sector in the previous 5 years.

High Gross Profit to Asset Ratio

Adobe stock is in the top quartile compared to its peers on Gross Profit to Asset Ratio. This is a popular measure among value investors for showing superior returns in the long run.

 

What we don’t like:

Overpriced compared to earnings

The stock is trading high compared to its peers on a price-to-earnings basis and is above the sector median.

Overpriced compared to book value

Adobe stock is trading high compared to its peers median on a price-to-book value basis.

Overpriced on a cash flow basis

The stock is trading high compared to its peers on a price-to-cash flow basis. It is priced above the median for its sectors. Proceed with caution if you are considering buying.

Overpriced on a free cash flow basis

Adobe stock is trading high compared to its peers on a price-to-cash flow basis. It is priced above the median for its sectors. Proceed with caution if you are considering buying.