Revenue Model Transition Paves Way for Immediate Future Growth


Adobe Systems Surpasses Estimates on Cloud Subscribers

Software company Adobe Systems Inc. (ADBE, $45.68) beat quarterly profit expectations on surprising momentum with its new Creative Cloud product.  The company is sacrificing short-term revenue and earnings from traditional up-front software purchases, and implementing a monthly subscription model for its popular graphic-design products.  

Watch for an immediate rebound on margins, as earnings are expected to climb 19% and 25% in 2014 & ’15.

Adobe Systems Inc. ten-year chart 06-26-13

Adobe Systems Inc.
ten-year chart

Standard & Poor’s Research (S&P) gives ADBE shares a Qualitative Risk Assessment of “Medium”.  “Our risk assessment reflects the regularly changing nature of the software arena, and our view that the success of new products will depend on the global economic environment.  These factors are offset by our view of the company’s size and market leadership, strong operating history, and solid balance sheet.”

ADBE shares retraced their Nov. 2007 highs in May 2013.  The stock

Adobe Systems Inc. three-month chart 06-26-13

Adobe Systems Inc.
three-month chart

has a bullish chart pattern, trading between $42 and $47 for the last three months.  The price will likely remain above $44 now, although we could get one more day where it spikes below $44.  

ADBE could appeal to growth stock investors and aggressive growth investors.

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Happy investing!


Crista Huff


Goodfellow LLC

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