Tax rate to fall; CFO to retire
Adobe's overnight announcement of a decline in its tax rate should boost EPS estimates for FY19 and onwards by 3-4%. We had seen some risk that Adobe might not benefit fully from the headline reforms given offsets elsewhere, but the net benefit is at the high end of expectations. Meanwhile the retirement of CFO Mark Garrett should be manageable, coming after Adobe's successful transition to a recurring business model. We are raising our price target to $225, assuming the stock trades on a forward PE of 31x in a year.Adobe is a software company. The company provides a line of products and services used for creating, managing, delivering, measuring, optimizing, engaging and transacting with content across personal computers, devices and media. The company's segments are: Digital Media, which provides products, services and solutions that enable individuals, teams and enterprises to create, publish and promote their content; Digital Experience, which provides a platform and set of applications and services through Adobe Experience Cloud; and Publishing, which contains products and services that address market opportunities including eLearning solutions, web conferencing, web application development and printing.
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