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We were watching Adobe (NASDAQ:ADBE) as the shares fell recently, and finally stuck our toes in the water. Yesterday, the shares performed well off a Cowen & Co. upgrade that is right in line with our thesis on the stock.

According to the article in Tech Trader Daily:

On an ugly, ugly day for technology stocks, Adobe Systems (ADBE) shares rose 90 cents to $28.89 after Cowen & Co. analyst Walter Pritchard raised his rating on the stock to “outperform” from “neutral,” asserting that the market fears concerning the company’s transition to the new generation of its Creative Suite of graphics products “has brought valuation in line with a level that the stock has traditionally troughed.” In other words, he thinks the stock’s 24% year-to-date slide is more than sufficient.

Yep, that is in line with our own read on valuation.

The Tech Trader article continues:

The unusual thing about Pritchard’s call is that he actually cut his profit forecasts: he now sees fiscal year November 2006 profits of $1.20 a share, down from $1.26, on revenue of $2.61 billion, down from $2.66 billion. Likewise, he cut his 2007 forecast to $1.41 a share, from $1.46, on revenues of $3.0 billion, down from $3.1 billion. As Pritchard notes, the company is going to report earnings for the May quarter on Thursday. And the analyst writes that he “would be especially encouraged” if management reduced the 2006 forecast to the point “where risk is eliminated.”

Check again. One way to tell a stock has bottomed is going up on “bad” news - in this case a reduction in estimates that was not as bad as investors were baking into the price.

ADBE 1-yr chart:

ADBE 1-yr

Source: Bottom Firmly in Place? Adobe Goes Up Despite Cuts to EPS Estimates (ADBE)