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Cloud Combat: 3 Top Stocks to Track after the Adobe Flash Deal


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In a flagship deal, digital flash giant Adobe (ADBE) recently announced its decision to expand its eCommerce power by purchasing cloud-based platform Magento Commerce. The deal cost a staggering $1.68 billion and was part of a bid by Adobe to establish a global platform that "enables commerce to be seamlessly integrated into the Adobe Experience Cloud."

The acquisition is due to be completed in the third fiscal quarter and evidently sent jolts through the market, with some analysts speculating it could spark a cloud war between rival cloud-based platforms.

With this in mind we used the TipRanks Trending Stocks platform and News Sentiment features, to gain some deeper insights and pinpoint some top buy stocks to track after the deal, namely Adobe (ADBE) and a pair of cloud-centric rivals, Salesforce.com (CRM) and Wix.Com Ltd (WIX).

Salesforce.com (CRM)

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Following the Adobe-Magento deal, cloud-computing competitor Salesforce still managed to maintain its ground, with a Strong Buy stock consensus from the Street. With data compiled from 29 top-performing analyst ratings, the CRM software solution company received a bullish 12-month average price projection of $138.62 on May 27, with an average of $138.62, a high target of $161 and low target of $116.

Earlier this year, 5-star rated Cowen analyst Derrick Wood declared how "Adobe and Salesforce are engaged in a new war for who owns the system-of-record" since "both companies want to be the center of digital transformation and artificial intelligence for corporate customers."

This was the case at the Adobe Summit conference in Las Vegas in March, when Adobe had originally indicated its intention to expand its cloud-computing services. Around the same time Salesforce announced the landmark acquisition of cloud-integration platform Mulesoft Inc (MULE) for a staggering $6.5 billion. Seemingly, the latest Adobe acquisition seems to mark another round in the ever-growing "cloud war."

After the latest Adobe deal, SalesForce still received a resounding bullish news sentiment.

Top rated Keybank analyst Brent Bracelin, with a 75% success rate and 20.2% average return assigned a Buy rating for Salesforce. With a price target of $147 and a 14.88% upside potential, Bracelin still believes Salesforce has "room to grow."

The fact that out of 29 top performing analysts, 27 maintained a Buy rating for Salesforce, implies the Adobe deal didn’t seem to have too much impact on the analyst confidence. Credit Suisse analyst Brad Zelnick also sustained his Buy rating for Salesforce, with a price target of $150. He emphasized that "we have assumed coverage of Salesforce.com. We have made no changes to our rating, target price, or estimates at this time."

Wix.Com Ltd (WIX)

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In the fallout from the Adobe deal, cloud-based rival Wix also sustained its Strong Buy stock consensus rating from the Street. With data compiled from 7 Best Performing analysts, the web development platform has an average 12-month price target potential of $91.36, with a high of $98 and a low of $85.50 (6.54% upside potential).

After the deal, there was a little hesitation from the Street. Top-rated JP Morgan analyst Sterling Autymaintained a Hold rating on Wix, with a $85.75 price target and a 1.25% upside potential. Despite his neutral position, he highlighted how Adobe’s acquisition of Magento would not pose a direct competitive threat to Wix. He added that it "may allow it to come down market to compete against" other eCommerce rival Shopify (SHOP) "long before any real head-to-head competition with Wix."

Although the deal might have had some initial impact on analyst sentiments, others still believe that Wix is on track for longer-term growth. Top performing SunTrust analyst Naved Khan with a 100% success rate and a 46.27% average return on the Wix Stock, raised his price target on Wix.com to $98 (14.29% upside potential). Khan believed that Wix’s revenue growth throughout Q1 "reflects the company's longer growth story." Khan cites "significant boost to lifetime cohort collection" with regard to Wix’s on enhanced visibility, long-term fundamentals, revenue and conversions. The analyst added that the "Wix Code platform is also showing good promise."

Adobe (ADBE)

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Following the landmark acquisition, Photoshop giant Adobe surprisingly received a Moderate Buy stock consensus rating from the street, as some analysts maintained a neutral position on the stock. JP Morgan analyst Sterling Autydefended his position since it "will take a couple of quarters to gauge this growth opportunity under Adobe ownership."

Nevertheless, the five-star rated analyst with a 67% success rate and 16.1% average return, is still bullish about the deal, as it "brings a platform that Adobe can build on to satisfy its largest customers."

Despite some hesitation, Adobe is still on track for record 52-week high, with an average 12-month projected price target of $251.24, up from $208 on April 1 (3.15% upside potential). Moreover, based on the recommendations of 22 top-performing analysts, the stock received an average high 12-month target of $273 and a low target of $199.

In the aftermath of the deal, the overall news sentiment is quite bullish too for the digital giant. BMO Capital analyst Keith Bachman is optimistic for Adobe, embracing how the purchase "makes strategic sense." The 5-star rated analyst Bachman with a success rate of 100% and 41.2% average profit on the Adobe stock, maintained his outperform status with a price target of $260.

Morningstar Inc. analyst Rodney Nelson highlighted how Adobe was hoping to expand its cloud-based solutions since 2016 as "this was viewed as a very glaring gap in their portfolio." Adobe originally set its sights on Demandware Inc but beat to the post by competitor Salesforce. Nelson emphasized how "the Magento acquisition heightens competition with Salesforce, which beat out Adobe for Demandware two years ago."

Top rated Richard Davis upgraded to Buy for Adobe with a price target of $245 (0.59% upside potential). Davis, who maintains 100% success rating and 46.8% average profit for the Adobe Stock, did highlight that "the transaction is likely to be nearly immaterial financially." However, he added that "the move makes a lot of sense" and Adobe is "well positioned for many years of growth."

Top performing Baird analyst Robert Oliver also upgraded his price target to $260 and champions Magento as "one of the leading e-commerce platforms and fills a gap in Adobe's Experience Cloud offering." The 5-star rated analyst has an impressive success rating of 98% with average return rate of 36.9% and believes the deal will enable Adobe to step up its competitive edge over other cloud-based rivals.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Investing Ideas , Cloud computing , Stocks , Technology
Referenced Symbols: ADBE , CRM , WIX


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