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Adobe's Margin of Safety Before Earnings

. 1 min read

Adobe Systems (ADBE) is expected to reports earnings tomorrow after market close. ADBE surged to new highs after its Q1 beat and is currently trading at 95% of its 52-week high.

*Please note the embedded models below are not yet supported on mobile devices. Please view in your desktop browser.*

ADBE's stock price has outperformed comparable companies (CRM), Intuit (INTU), Citrix (CTXS) and Symantec (SYMC) increasing almost 20% year-over-year.

After last quarter’s earnings beat, ADBE management raised FY‘16 guidance and Wall Street quickly followed suit. Consensus estimates have ADBE’s revenues reaching over $10.1 billion by 2020 representing a 16% compounded annual growth rate (CAGR).

CRM is the only comparable company projected to enjoy a higher 5-year revenue CAGR.

CRM is also the only comparable company trading at higher EBITDA multiples.

A fair value of ~$100 per share is calculated by applying a 15x EBITDA exit multiple along with Wall Street consensus projections in the DCF analysis below. This represents a 5% margin of safety compared to current prices. Let’s see whether ADBE beats or misses on tomorrow’s announcement and the resulting price movement.