Why Adobe Stock Soared 45.8% in 2019
What happened
Shares of Adobe (NASDAQ: ADBE) climbed 45.8% in 2019, according to data from S&P Global Market Intelligence. That result trounced the S&P 500's 29% gain as the creative software specialist's cloud and subscription services continued to gain steam.
So what
Adobe mustered a more than 30% gain in the first half of last year on the heels of better-than-expected quarterly updates in March and June. In the press release that accompanied the second-quarter report, CEO Shantanu Narayen pointed to an "explosion in creativity across the globe," as well as the company's efforts to build innovative software solutions with more "engaging customer experiences."
IMAGE SOURCE: GETTY IMAGES
Between then and October, however, Adobe stock gave back about half its year-to-date gain as investors digested the implications of yet another solid quarterly report in September that was accompanied by seemingly tepid Q4 guidance relative to Wall Street's expectations.
But it turned out that the company's forecast had been conservative; Adobe ended the fiscal year with an exceptional fourth-quarter report in mid-December that handily beat both management's guidance and analysts' consensus targets.
All told, Adobe's revenues soared 24% in fiscal 2019 to $11.17 billion, spurred by a 22% increase in digital media segment revenue to $7.71 billion, and 31% growth from its digital experience products to $3.21 billion. Perhaps most impressive, Adobe exited the fiscal year with $8.4 billion in digital media annual recurring revenue (ARR), up from $6.71 billion in fiscal 2018.
Now what
Management signaled that it anticipated the momentum will largely continue in the 2020 fiscal year, issuing guidance for revenue to increase 17.7% to $13.15 billion -- including net new digital media ARR of $1.55 billion -- with adjusted net income of $9.75 per share.
Given management's propensity for low-balling such targets, however, it should come as no surprise that Wall Street's consensus models already call for the company to slightly outpace its revenue and earnings forecasts. Barring a preliminary release in the next few weeks, we should receive our next update about where Adobe stands when it reports fiscal first-quarter 2020 results around the middle of March.
For now, though, suffice it to say Adobe's shareholders should be more than pleased with the state of its business.
10 stocks we like better than Adobe Systems
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Adobe Systems wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of December 1, 2019
Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends Adobe Systems. The Motley Fool has a disclosure policy.
