Adobe Systems ADBE is set to acquire cloud-based e-commerce content management system (CMS) software provider Magento for $1.68 billion. The company offers software for developing and operating web stores, handling online purchases, shipping and returns.
Magento generated revenues of almost $150 million in 2017. However, due to purchase accounting rules, Adobe will not be able to recognize most of the company's revenues over the next 12-months. This is expected to hurt the bottom line in fiscal 2018. Magento Improves Adobe's Competitive Prowess
Nevertheless, we believe Magento takeover will improve Adobe's competitive position in the e-commerce marketing market, which is currently dominated by salesforce.com CRM
, a Zacks Rank #1 (Strong Buy) stock. You can see the complete list of today's Zacks #1 Rank stocks here .
Notably, salesforce has become a dominant player primarily due to its 2016 acquisition of Demandware, a cloud-based provider of e-commerce services to big as well as small businesses.
Moreover, the buyout strengthens Adobe's presence in the CMS segment of the e-commerce market and intensifies competition for Shopify SHOP
, a Zacks Rank #3 (Hold) stock. No doubt, shares of the Canadian company declined more than 3% in pre-market trading
Notably, Adobe shares have returned 70.6% in the past year, while Shopify gained 60.5%.
Further, the acquisition will boost Adobe's competitive position against Wix.com WIX , another Zacks Rank #3 stock. The company offers ready templates, and drag-and-drop editor to make web stores look professional without any design experience.
Wix declined almost 4% to close at $85.50 on May 21. Shares have returned 16.4% in the past year, significantly underperforming Adobe's rally.
Magento Expands Adobe's TAM
Per Adobe, "Magento Commerce Cloud brings together digital commerce, order management and predictive intelligence into a unified commerce platform." Magento Commerce Cloud will be integrated into Adobe Experience Cloud, a suite of digital marketing services that include advertising and analytics tools.
Adobe Systems Incorporated Revenue (TTM)
Adobe Systems Incorporated Revenue (TTM) | Adobe Systems Incorporated Quote
The acquisition will help Adobe address the needs of both B2B and B2C customers globally and into varied industries. Moreover, Magento supports $155 billion in gross merchandise volume and has a strong clientele that adds to Adobe's customer base, per Bloomberg data.
Moreover, the acquisition increases Adobe's total addressable market (TAM) by an estimated $13 billion.
Currently, Adobe carries a Zacks Rank #3.
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Shopify Inc. (SHOP): Free Stock Analysis Report Wix.com Ltd. (WIX): Free Stock Analysis Report Salesforce.com Inc (CRM): Free Stock Analysis Report Adobe Systems Incorporated (ADBE): Free Stock Analysis Report To read this article on Zacks.com click here.