Q3 Preview: Adobe (ADBE) Looking to CS5 for Earnings Boost, Lifted Apple (AAPL) Restrictions Positive Going Forward
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Shares of Adobe Systems Inc. (Nasdaq: ADBE) are trading slightly lower ahead of the company's third quarter earnings results, expected out after the market closes today, September 21, 2010. Shares are down just 0.6% in the early-afternoon session.
The company is expected to report an EPS of $0.41 on revs of $984.07 million. For the second quarter, ADBE reported an EPS of $0.44 and revs of $943 million, both beating views. The company also announced a $1.6 billion stock buyback. For the third quarter last year, ADBE had an EPS of $0.35 and revs of $697.5 million, both topping estimates.
Shares of the company saw a 13.8% drop through the quarter to $27.70 at the end of August. The stock is down 25.3% from the start of 2010.
Notably, shares are up 20.4% since the end of August, catching the September rally along with the broader markets.
A simple valuation shows ADBE going for a forward P/E of 21.9x FY10 EPS estimates, Comparably, Microsoft (Nasdaq: MSFT) is at 10.7x, and Apple is going for 19.6x.
Data from Bloomberg shows that 21 analysts have a Buy rating on the shares, 9 have a Hold, and none recommend to Sell the stock. The analyst price target average is $40.62, with a high of $46 and a low of $3.
Analyst Ratings Through the Quarter
At the onset of the quarter, June 1, BofA/Merrill Lynch upgraded the shares from Neutral to Buy.
Also in June, Standpoint started the company with a Buy rating, and $36 price target. They noted that shares have limited downside, which would be supported by the $1.6 billion buyback.
In July, Avian upgraded ADBE from Neutral to Positive, with a $35 price target.
Finally, Citi made Adobe one of their "Top Picks" in the Tech Sector, believing that revenue upside is more likely to flow to the bottom line in Q310.
Summary
Goldman Sachs is reiterating their Buy rating on the shares, and are expecting a strong quarter from the company. Notably, they think that CS5 sales will be up and that Omniture's suite will have upside to current estimates. Underperformance YTD is due mostly from compression tied to Apple (Nasdaq: AAPL) excluding Flash from their devices. With that overhang now gone, Goldman thinks that solid financial performance could drive multiple upside to current stock levels.
Notably, Apple lifted their restrictions for Adobe at the start of September, so it shouldn't affect their third quarter results. Apple still bans flash in its iPhone and iPad web browsers, but developers will be able to use the format for creating apps on the devices. Such a move may spur Adobe to increase their guidance going forward.
Adobe Systems Inc. is expected to release their Q310 earnings on Tuesday, September 21, 2010, at approximately 4:00pm EDT. Stay tuned to StreetInsider.com's Earnings section to see our analysis of the highly-anticipated quarterly results within seconds of their release.
The company is expected to report an EPS of $0.41 on revs of $984.07 million. For the second quarter, ADBE reported an EPS of $0.44 and revs of $943 million, both beating views. The company also announced a $1.6 billion stock buyback. For the third quarter last year, ADBE had an EPS of $0.35 and revs of $697.5 million, both topping estimates.
Shares of the company saw a 13.8% drop through the quarter to $27.70 at the end of August. The stock is down 25.3% from the start of 2010.
Notably, shares are up 20.4% since the end of August, catching the September rally along with the broader markets.
A simple valuation shows ADBE going for a forward P/E of 21.9x FY10 EPS estimates, Comparably, Microsoft (Nasdaq: MSFT) is at 10.7x, and Apple is going for 19.6x.
Data from Bloomberg shows that 21 analysts have a Buy rating on the shares, 9 have a Hold, and none recommend to Sell the stock. The analyst price target average is $40.62, with a high of $46 and a low of $3.
Analyst Ratings Through the Quarter
At the onset of the quarter, June 1, BofA/Merrill Lynch upgraded the shares from Neutral to Buy.
Also in June, Standpoint started the company with a Buy rating, and $36 price target. They noted that shares have limited downside, which would be supported by the $1.6 billion buyback.
In July, Avian upgraded ADBE from Neutral to Positive, with a $35 price target.
Finally, Citi made Adobe one of their "Top Picks" in the Tech Sector, believing that revenue upside is more likely to flow to the bottom line in Q310.
Summary
Goldman Sachs is reiterating their Buy rating on the shares, and are expecting a strong quarter from the company. Notably, they think that CS5 sales will be up and that Omniture's suite will have upside to current estimates. Underperformance YTD is due mostly from compression tied to Apple (Nasdaq: AAPL) excluding Flash from their devices. With that overhang now gone, Goldman thinks that solid financial performance could drive multiple upside to current stock levels.
Notably, Apple lifted their restrictions for Adobe at the start of September, so it shouldn't affect their third quarter results. Apple still bans flash in its iPhone and iPad web browsers, but developers will be able to use the format for creating apps on the devices. Such a move may spur Adobe to increase their guidance going forward.
Adobe Systems Inc. is expected to release their Q310 earnings on Tuesday, September 21, 2010, at approximately 4:00pm EDT. Stay tuned to StreetInsider.com's Earnings section to see our analysis of the highly-anticipated quarterly results within seconds of their release.
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