Adobe stock fell to a 12-year low following news that it is acquiring Figma, and also amid its recent fiscal Q3 report.
Adobe stock recently plunged following reports that the multinational computer software company will acquire design platform Figma for $20 billion. According to reports, the acquisition deal will comprise a 50-50 payment in cash and stock, and close in 2023. However, the conclusion of the deal between both parties is subject to regulatory approval and other closing conditions.
As of yesterday morning, Adobe Inc (NASDAQ: ADBE) stock had lost 17%, its worst day since 2010.
Adobe chief executive officer Shantanu Narayen spoke on the Figma deal and the company’s latest quarterly outing, saying:
“Fueled by our groundbreaking technology, track record of creating and leading categories and consistent execution, Adobe delivered another record quarter. With the announcement of our intent to acquire Figma, we believe we have a unique opportunity to usher in a new era of collaborative creativity.”
In addition, Narayen also enthused about what the collaboration between Adobe and Figma portends. According to him, “Adobe’s greatness has been rooted in our ability to create new categories and deliver cutting-edge technologies through organic innovation and inorganic acquisitions. The combination of Adobe and Figma is transformational and will accelerate our vision for collaborative creativity.”
Jefferies analyst Brent Thill believes that Adobe is purchasing Figma at an exorbitant price. In a note to clients, Thill writes that the deal will be earnings dilutive within the first two years and neutral in the third year.
The Figma deal represents Adobe’s largest acquisition of all time and is four times as large as the Marketo deal from October 2018. Back then, Adobe forked out $4.75 billion for the marketing software-selling company.
Figma
Valued at $10 billion in its last funding round last year, Figma is a collaborative web application for interface design. In addition, the software has additional offline features tailored to various desktop applications and competes for head-on with Adobe’s XD program.
Founded in 2012, Figma enjoys backing from several venture capital firms, including Index Ventures, Greylock Partners, and Kleiner Perkins. The company is reportedly expected to generate over $400 million in annual recurring revenue this year.
Adobe Stock News, Besides Pending Figma Acquisition
Adobe stock also fell after the California-headquartered company reported mixed quarterly results. For its fiscal third quarter, Adobe posted a revenue haul of $4.43 billion, which matched the general consensus estimate. In addition, the company’s reported adjusted earnings of $3.40 per share surpassed Refinitiv analysts’ estimates of $3.33 per share.
In light of its fiscal Q3 outing, Adobe also provided mixed guidance for the fiscal fourth quarter. According to the popular computer software company, revenue in the incoming fiscal quarter will be $4.52 billion. This projection is marginally less than the consensus estimates of $4.6 billion forecast by StreetAccount. Furthermore, Adobe also projects earnings of $3.50 per share, adjusted, compared to StreetAccount’s forecast of $3.47 per share.
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