Adobe earns several cuts as Figma’s $20 billion deal is a near-term deal

Adobe earns several cuts as Figma’s  billion deal is a near-term deal

Written by Sinad Karahimetovic

Analysts described Adobe’s (NASDAQ:) $20 billion deal to buy design firm Figma as “too expensive,” as the cost of financing the deal prompted several companies to downgrade the stock.

For Jefferies analysts, the Figma deal “looks expensive against the expected year-end ARR of $400 million.” A Bank of America analyst cut the rating to neutral from buy with a target price of $350 per share from $450. He now sees Adobe as “Show me a story.”

โ€œThe 3-year horizon of accumulation indicates little synergy in operating income/NT revision. Also, sharp valuation (50x C22 rev) indicates that Figma is a formidable stand-alone competitive threat. While the stock is trading as low as 15x C23e FCF (0.9 x our +17% yoy (C23e FCF), in line with our larger corporate peers, we believe the proposed acquisition is likely to be a burden until transaction closes and the value of such a massive acquisition (14% of the total), Bank of America analyst said in a note to the client. market value) becomes clearer.

Similarly, a Barclays analyst downgraded the rating to Equal Weight from Overweight with a share price target of $340, down from $440. The three main reasons behind rating downgrades are:

  1. Earnings per share estimates on the previous transaction can be deferred by a year;
  2. 10/18 FA Day can be a catalyst for lower numbers; And the
  3. ADBE can under-promise and over-deliver EPS relief while still performing in the same line.

Elsewhere, analysts at Oppenheimer and Bird also lowered Adobe’s rating.

Adobe shares closed down 16.79% yesterday and fell 2.3% in the pre-opening period on Friday.

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