Adobe Shares Higher Ahead Of FY Q2 Results Thursday

Adobe Systems (ADBE) shares are higher Wednesday ahead of the company’s announcement Thursday afternoon of results for its fiscal second quarter ended May. The Street expectations for the report are high, and trading in the stock and its options has become a little fevered; Bloomberg reports that call option volume is running quadruple normal levels.

Goldman Sachs analyst Sasa Zorovic late Tuesday increased his revenue estimate for the May quarter to $734 million from $721 million; the Street is at $729 million, and the company guidance was $700 million to $740 million. His EPS estimate goes to 36 cents from 35 cents; the Street is at 35 cents, and the guidance was 34-36 cents.

For the full year, Zorovic’s revenue estimate goes to $3.007 billion from $2.994 billion; pro forma EPS goes to $1.50 from $1.48. GAAP EPS goes to $1.37 from $1.36.

“Our conversations with Adobe’s resellers over the past couple of weeks continue to indicate a fairly strong start to the CS3 product cycle (particularly bundles) as well as increased growth for Acrobat (after its sluggish product cycle start in February),” he writes.

He maintains a Buy rating and $47 price target on the stock.

There were some other notes previewing the quarter Wednesday, and they were all largely bullish.

Brad Manuilow, of American Technology Research, asserted that the company will need to drive the consensus for the November quarter higher in order for the stock to move up from here. He is looking for May quarter revenue of $730.5 million and EPS of 36 cents; for the August quarter he sees $801.5 million and 44 cents.

Steve Frankel, of Canaccord Adams, Wednesday wrote that he sees the results topping his own estimate of $718 million and 35 cents a share; he repeated his Buy rating and $50 price target. For Q3 he sees $783 million and 39 cents, but expects the company to guide higher.

Morgan Stanley’s Peter Kuper likewise wrote Wednesday that he sees the company topping his estimate of 36 cents a share for the quarter. Kuper writes that channel checks show “healthy acceptance” for CS3, as well as “surprising strength for CS2,” and “some incremental Acrobat 8 stability” over the last quarter. Kuper notes that the stock is near his $44 stock price, and that to move higher, guidance would need to be above expectations.

One final note: Adobe is one of 22 stocks included on Citigroup’s new “Global Tech Conviction List,” which was unveiled Wednesday. It’s a collection of previous recommendations, not a new recommendation; still, maybe it helped a little.

Oh, and one more thing (I sound like Steve Jobs). My colleague Michael Santoli says there was some chatter on the Minyanville site offering the theory that maybe IBM (IBM) would like to buy Adobe. Options columnist Steve Sears heard something similar from a source of his. I’m skeptical; IBM’s approach to software has involved middleware and the IT stack; not graphics applications. But I suppose anything is possible.

Adobe Wednesday was up $1.28 at $44.01, and was clearly accelerating into the close.

ADBE 1-yr chart: