Adobe Systems (NASDAQ: ADBE) offers
business and mobile software and services. The firm's products include tools for professional publishing, Web design, video production, business process automation, and mobile device interfacing. Its well-known Acrobat Reader displays portable document format (PDF) files on the Internet. Its Web and print publishing products include the widely-used Photoshop, Illustrator, and PageMaker programs. Adobe's InDesign publishing package provides professional layout and design applications. Apple (NASDAQ: AAPL) and Microsoft (NASDAQ: MSFT) are competitors.
The company pleased investors last week, when it reported Q1 EPS of 48 cents and revenues of $890.4 million. The Street had been expecting 45 cents and $875.8 million. Management also guided Q2 EPS to 45-47 cents (44 cent consensus), Q2 revenues to $855-$885 million ($874.69M consensus) and FY08 EPS to $1.86-$1.92 ($1.82 consensus).
The stock
popped through 30-day and 50-day moving average resistance on the news and then began consolidating the gain in a bullish "flag" pattern. Prices frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Brokers recommend the issue with nine "strong buys", seven "buys", eight "holds" and three "underperforms". Analysts expect a 14% growth rate, through the next year. The ADBE Price to Free Cash Flow ratio (13.02), Sales Growth rate (37.11%), EPS Growth rate (77.78%), Operating Margin (29.03%) and Net Profit Margin (23.52%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 88% of the outstanding shares. The stock is one of those used to calculate the S&P 500 Index. Over the past 52 weeks, it has traded between $30.70 and $48.47. A stop-loss of $31.25 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.
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