After learning last week that it would be investing $20 billion to buy rival Figma, a sum that many analysts have regarded as excessive, Adobes (NASDAQ:ADBE)stock dropped once further on Tuesday by market open.
The Figma transaction is the correct product fit, but the price tag provides no room for error, according to Wells Fargo analyst Michael Turrin, who changed his rating from overweight to equal weight. The analyst also mentioned that it was the biggest transaction for a private software company and the highest multiple ever paid, suggesting there may have been competition involved.
ADBE stock forecast and company projections
Because of this, Turrin stated in a note, we expect investor questions about slowing growth [and] growing competition on the digital media side of the business will only escalate, [especially] given 3Q results/4Q guidance show price hikes arent providing as much of an offset as anticipated.
The analyst also suggested that since the merger isnt scheduled to be finalized until 2023, worries would probably linger, and Adobes (NASDAQ:ADBE) shares would continue to trade in a narrow range. Investment company Edward Jones also downgraded Adobe (ADBE), with analyst Logan Punk citing reservations about the potential merger. We can see the positives, but the high premium paid, shareholder dilution, and longer integration schedule increase the execution risk, Punk wrote in a note to clients.
ADBE stock (ADBE) decreased 1.5% to $295 in premarket trade, continuing the weeks fall.
After Adobe (ADBE) announced the deal and released conflicting financial data on Friday, a number of other Wall Street analysts downgraded the stock.
Generally speaking, analysts are wary about Adobe (ADBE). Wall Street analysts rank it a BUY, but authors of Seeking Alpha give it a HOLD rating.
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Author: Jowi Kwasu
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