More analysts downgrade Adobe after Figma deal

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Adobe($NASDAQ:ADBE)’s stock took a hit on Monday after news broke that the company was planning to acquire Figma for $20 billion. Many analysts have downgraded Adobe’s stock, citing the high price tag as a cause for concern. While the move may be a good strategic fit for Adobe, some experts are worried that the company is overpaying and that the deal may not pay off in the long run. Only time will tell if this acquisition will be a success or a failure, but for now, investors are understandably cautious.

Stock Price

On Monday, Adobe stock opened at $294.9 and closed at $296.1, down by 1.1% from the previous closing price of $299.5. This followed a series of analyst downgrades after the company announced its deal to acquire Figma. While the deal has been widely praised, some analysts are concerned about the high price tag and the impact it will have on Adobe’s bottom line. Adobe is paying a hefty premium for Figma, and it remains to be seen whether the acquisition will pay off in the long run.

VI Analysis

Adobe Inc is a software company that provides creative software products and services. The company’s fundamentals reflect its long term potential and below we provide a simple analysis of Adobe Inc using the VI app. According to the VI Star Chart, Adobe Inc has a high health score of 8/10 considering its cashflows and debt. This indicates that the company is capable of paying off debt and funding future operations. Adobe Inc is strong in growth and profitability, and medium in asset strength. However, the company is weak in dividend strength. Overall, Adobe Inc is classified as a ‘gorilla’. This is a type of company that has achieved stable and high revenue or earning growth due to its strong competitive advantage. High growth companies are deemed more risky as they attempt to grow faster. However, Adobe Inc appears to be a strong and stable company with good long-term potential.

Summary

Adobe Inc shares fell sharply on Wednesday after a number of analysts downgraded the stock following the company’s announcement that it was acquiring Figma, a cloud-based design platform. The deal is expected to close in the fourth quarter of Adobe’s fiscal year. Analysts at BofA Merrill Lynch, Goldman Sachs and JPMorgan all lowered their ratings on Adobe stock to neutral from buy following the announcement. Goldman Sachs analyst Heath Terry said in a note to clients that the Figma acquisition could be a positive for Adobe in the long run, but that the near-term impact on the company’s earnings and cash flow is likely to be negative. JPMorgan analyst Brad Zelnick also cautioned that the Figma deal could be dilutive to Adobe’s earnings in the near term, but said that the long-term benefits of the acquisition could be significant.