Adobe Systems: Pull-back is buy opportunity

Posted Dec 11th 2009 5:00PM by Joseph Lazzaro
Filed under: Adobe Systems (ADBE), Stocks to Buy

Investors who can tolerate moderate risk should take advantage of the recent pull-back in Adobe Systems Incorporated (ADBE) shares to buy shares, and I'm obviously reiterating my buy rating for the company, first recommended on June 9, 2009 at a price of $29.77.

Further, although the U.S./global economic slowdown has weighed on Adobe's Creative Suite 4 results, the company remains 'in the catbird seat' regarding rich Internet applications, and companion web-based graphics and video production tools. Cost containment is adequate.

The First Call FY2009/FY2010 EPS estimates for APBE are $1.52 to $1.79. That FY2010 EPS estimate will likely prove to be low.

Technically, Adobe's stock chart looks good: an uptrend, with only minor, corrective pull-backs, and a stock price that's almost always above the key, 50-day moving average -- the latter of which indicates institutional investors (IIs) are continuing to establish/add to ADBE positions. According to my analysis, Adobe will trade near $50 by the end of 2010.

Stock Analysis: Adobe Systems' is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in ADBE now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your ADBE position before February 2010. Sell/stop loss if you were to buy shares in this company: $13.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

Tags: adobe, image editing, ImageEditing, software

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Reader Comments (Page 1 of 1)

12-11-2009 @ 5:51PM

pete c. said...

Adobe earnings for 2009 will be not only below 2008 earnings but below 2007 earnings.How do you justify a pe ratio of 30 on this stock.there cost reductions are to fire all their workers. Now I see, hell with fundamentals,just hype the stock.