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Adobe (ADBE) Cancels Figma Buyout, Frees Up $6 Billion in Cash
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Adobe (ADBE - Free Report) frees up its resources after shelving the $20 billion acquisition of Figma, which was announced in September 2022.
Mounting pressure from regulators in the United Kingdom and the European Union, leaving no surety for antitrust approvals, convinced Adobe and Figma to terminate the merger mutually.
Regulators were concerned about Adobe’s monopoly. They were also of the view that Figma, a provider of a web-first collaborative design platform, will be able to add to the innovation of its fast-growing platform if it is allowed to flourish independently.
Per the regulators, Adobe was asked to make a significant divestment of assets, source code and engineers to sustain the competitive nature of the market.
The latest move is expected to be beneficial for Adobe.
Thanks to the termination of the Figma merger, Adobe now has $6 billion in cash, which gives the tech giant room for more buybacks. Increasing share repurchases will drive growth in the company’s bottom line. This, in turn, is making the investors optimistic about the stock.
ADBE will be able to inject more resources into its AI innovations, which in turn will likely strengthen its Creative Cloud platform.
Figma’s annual recurring revenue of $600 million accounted for a tiny portion of Adobe’s $12.4 billion of recurring revenue from Creative Cloud.
We note that Adobe’s growing investments in AI and generative AI innovations are expected to enhance its Creative offerings, which will likely expand its customer base in the future. This, in turn, has been aiding the company in winning investors’ confidence.
Adobe’s shares have gained 74.6% over a year, outperforming the Zacks Computer and Technology sector’s rally of 49.3% as well as the S&P 500 index’s gain of 25.6%.
The company is witnessing solid momentum with Adobe Firefly, a family of generative AI models, integrating natively across Adobe Creative Cloud, Adobe Express and Adobe Experience Cloud.
It recently unveiled the Adobe Firefly Image 2 Model, Adobe Firefly Vector Model and Adobe Firefly Design Model at Adobe MAX, offering new generative AI models for imaging, vector graphics and template design.
The factors above are likely to aid the financial performance of the company in the coming days.
For first-quarter fiscal 2024, Adobe projects total revenues between $5.10 billion and $5.15 billion. The Zacks Consensus Estimate for the same is pegged at $5.08 billion, indicating growth of 9.1% year over year.
Management expects non-GAAP earnings between $4.35 and $4.40 per share. The consensus mark for the same is pinned at $4.36 per share, reflecting growth of 14.7% from the year-ago actual. The figure was revised upward 2.8% in the past seven days.
For fiscal 2024, Adobe projects total revenues between $21.30 billion and $21.50 billion. The Zacks Consensus Estimate for the same is pegged at $21.41 billion, indicating growth of 10.3% from the fiscal year-ago reported figure.
Management expects non-GAAP earnings between $17.60 and $18.00 per share. The consensus mark for the same is pinned at $18.03 per share, indicating growth of 12.2% year over year. The figure was revised upward 0.95% in the past seven days.
Image: Shutterstock
Adobe (ADBE) Cancels Figma Buyout, Frees Up $6 Billion in Cash
Adobe (ADBE - Free Report) frees up its resources after shelving the $20 billion acquisition of Figma, which was announced in September 2022.
Mounting pressure from regulators in the United Kingdom and the European Union, leaving no surety for antitrust approvals, convinced Adobe and Figma to terminate the merger mutually.
Regulators were concerned about Adobe’s monopoly. They were also of the view that Figma, a provider of a web-first collaborative design platform, will be able to add to the innovation of its fast-growing platform if it is allowed to flourish independently.
Per the regulators, Adobe was asked to make a significant divestment of assets, source code and engineers to sustain the competitive nature of the market.
Adobe Inc. Price and Consensus
Adobe Inc. price-consensus-chart | Adobe Inc. Quote
Adobe to Prosper
The latest move is expected to be beneficial for Adobe.
Thanks to the termination of the Figma merger, Adobe now has $6 billion in cash, which gives the tech giant room for more buybacks. Increasing share repurchases will drive growth in the company’s bottom line. This, in turn, is making the investors optimistic about the stock.
ADBE will be able to inject more resources into its AI innovations, which in turn will likely strengthen its Creative Cloud platform.
Figma’s annual recurring revenue of $600 million accounted for a tiny portion of Adobe’s $12.4 billion of recurring revenue from Creative Cloud.
We note that Adobe’s growing investments in AI and generative AI innovations are expected to enhance its Creative offerings, which will likely expand its customer base in the future. This, in turn, has been aiding the company in winning investors’ confidence.
Adobe’s shares have gained 74.6% over a year, outperforming the Zacks Computer and Technology sector’s rally of 49.3% as well as the S&P 500 index’s gain of 25.6%.
The company is witnessing solid momentum with Adobe Firefly, a family of generative AI models, integrating natively across Adobe Creative Cloud, Adobe Express and Adobe Experience Cloud.
It recently unveiled the Adobe Firefly Image 2 Model, Adobe Firefly Vector Model and Adobe Firefly Design Model at Adobe MAX, offering new generative AI models for imaging, vector graphics and template design.
The factors above are likely to aid the financial performance of the company in the coming days.
For first-quarter fiscal 2024, Adobe projects total revenues between $5.10 billion and $5.15 billion. The Zacks Consensus Estimate for the same is pegged at $5.08 billion, indicating growth of 9.1% year over year.
Management expects non-GAAP earnings between $4.35 and $4.40 per share. The consensus mark for the same is pinned at $4.36 per share, reflecting growth of 14.7% from the year-ago actual. The figure was revised upward 2.8% in the past seven days.
For fiscal 2024, Adobe projects total revenues between $21.30 billion and $21.50 billion. The Zacks Consensus Estimate for the same is pegged at $21.41 billion, indicating growth of 10.3% from the fiscal year-ago reported figure.
Management expects non-GAAP earnings between $17.60 and $18.00 per share. The consensus mark for the same is pinned at $18.03 per share, indicating growth of 12.2% year over year. The figure was revised upward 0.95% in the past seven days.
Zacks Rank & Stocks to Consider
Currently, Adobe carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector are Badger Meter (BMI - Free Report) , Arista Networks (ANET - Free Report) and NVIDIA (NVDA - Free Report) . All three stocks carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of Badger Meter have gained 37.8% in the year-to-date period. BMI’s long-term earnings growth rate is currently projected at 20.39%.
Shares of Arista Networks have surged 75.9% in the year-to-date period. The long-term earnings growth rate for ANET is currently projected at 19.77%.
Shares of NVIDIA have gained 167.4% in the year-to-date period. NVDA’s long-term earnings growth rate is currently projected at 13.5%.