Canaccord Genuity Morning Coffee on Adobe Systems (ADBE): Maybe We Should Use the Airbrush Tool?

June 21, 2012 10:37 AM EDT
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Price: $110.97 +0.23%

Rating Summary:
    24 Buy, 14 Hold, 1 Sell

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    Up: 24 | Down: 17 | New: 14
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Canaccord Genuity Morning Coffee on Adobe Systems (Nasdaq: ADBE): Maybe we should use the airbrush tool?

Shares of Adobe Systems, maker of Photoshop and Acrobat software, fell after it cut its full-year revenue outlook as weak demand in Europe could affect sales of the recently launched versions of its popular design software. The company launched its Creative Suite 6, which includes Photoshop, Illustrator, InDesign, Flash and Dreamweaver, and the Web-based Creative Cloud products in the second quarter. Analysts have expressed concern that the Web-based subscription service will hurt Adobe's financial growth at least over the short term. Adobe's sales typically surge after a Creative Suite upgrade, but analysts have said the revenue upswing might be smaller than in the past because customers who switch to the new service will not buy their software up front, but subscribe instead and make much lower initial payments. It takes the company more than four years to collect as much from a subscriber as it generates from a single sale of the desktop version of the top-end Master Collection package. Adobe also expects digital marketing suite revenue to grow quarter-overquarter, but revenue from its legacy enterprise products (Adobe Connect and Adobe LiveCycle) to fall slightly. For Q3/12, Adobe is projecting revenue of $1.075 billion to $1.125 billion, with non-GAAP profits of $0.56-0.61 a share. Street consensus had been for $1.13 billion and $0.61. For the full fiscal year, the company now sees top-line growth of 6-7% from previous guidance of 6-8% growth, and non-GAAP profits of $2.40-2.46 a share, narrowing the range from the previous forecast of $2.38-2.48 a share.

Note - In yesterday's trading, the stock opened $2.21 lower (from $32.89 to $30.68), but crept back up until closing at $31.99. However, the stock is down about 2.25% this morning.

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