Grizzle has been an ardent bull on Adobe (NASDAQ: ADBE). During the market pullback in December 2018, we pounded the table hard for investors to back the truck up. We don’t mess around with a company that churns out a billion in free cash flow quarterly, it’s a next level franchise that grows north of 20% annually.
Folks remember not to sleep on Adobe! It puts the FAANGs to shame, the future 🚀 $ADBE
— Thomas George (@thomasg_grizzle) December 12, 2018
Very rarely do blue-chip tech franchises like Adobe go on sale, investors have been handsomely rewarded since — the stock is up +40% from it’s December lows and up nearly 5% in trading today.
Adobe Share Price – 5 Year
Source: Yahoo Finance
We nailed big tech in 2018 and we’ve crushed it again in 2019 — Adobe and Visa being the standout calls.
Long $GOOG (+1.2% ytd) & short $FB (-21% ytd) was the RIGHT trade to put on in 2018! Grizzle correctly saw through all the BS of Facebook, the stock is broken.
In tech we own: $ADBE, $GOOG & $V (long term structural winners, always add on weakness).
Bless up fake cyber punk: pic.twitter.com/AuZ4r7Kjnk
— Thomas George (@thomasg_grizzle) December 19, 2018
Adobe Q2 2019 Earnings Review
Adobe notched Q2 revenue of $2.74B, representing growth of +25% year-over-year, beating street estimates by 1.4%.
Digital Media (Adobe’s core business) which includes Creative Cloud (e.g. Photoshop and Premiere) and Document Cloud (Acrobat – i.e. PDF) had a strong quarter with revenue of $1.89B growing 22% year-over-year.
On the conference call CEO Shantanu Narayen characterized the structural opportunity for the Digital Media division perfectly:
Amen to that, this has been Grizzle’s underlying long-term thesis and why we believe Adobe is dominantly positioned in an era of creative supremacy.
Their second largest division Digital Experience continues to be a core driver of incremental sales growth for the company with revenues up 34% year-over-year to $784M. Digital Experience is a suite of products that serves many companies’ growing needs for marketing, analytics and advertising.
Adjusted net income for the quarter stood at $901M, and non-GAAP EPS came in at $1.83/share, up +10.2% y/y and 3% ahead of analyst estimates.
Q3 2019 Earnings Outlook
The company is guiding to $2.8B for revenue in Q3, effectively in-line with analyst estimates. Adobe anticipates continued strong revenue growth from both Digital Media and Digital Experience segments, at +20% y/y and +34% y/y respectively.
Adobe estimates that non-GAAP earnings per share for Q3 will be $1.95/share — representing a +12.7% increase YoY, however, it is 5% shy of average analyst estimates of $2.05.
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