The Street's Enchanted with Adobe's Outlook

| About: Adobe Systems (ADBE)
This article is now exclusive for PRO subscribers.

Wow, that’s some hefty stack sitting on my desk -- the stack of Friday morning’s Adobe Systems (NASDAQ:ADBE) research reports. And they are practically glowing. The Street is simply enchanted with the graphics software company right now.

On Thursday, Adobe reported solid profits for its fiscal third quarter ended Sept. 1, and a strong outlook for the fourth quarter. The Street liked what it saw, and with the company preparing to launch new versions of both Acrobat and Creative Suite, there should be more good quarters ahead.

Here are a few excerpts from some of the dozen or so Adobe reports I’ve seen so far.

* Rick Sherlund, Goldman Sachs: We are adding Adobe to the Buy list with a 12-month price target of $42, up 28% from yesterday’s close. The company’s growth rate and stock price have been under pressure as we awaited new products, with the stock price now beginning to recover as we get closer to the launch of new products. Acrobat 8 ships in November, followed by Creative Suite 3 in the May quarter, both likely to be major new releases capable of reinvigorating growth and fueling further appreciation for the stock.

* Karen Haus, W.R. Hambrecht: The company saw strength in a number of its product lines, and all geographies contributed nicely to the solid performance in the quarter…at current levels we are somewhat cautious on ADBE shares given their recent price appreciation…we are concerned that the pending release of Microsoft Vista could cause a delay in PC and related applications spending which could negatively impact Adobe’s revenue for the next few quarters. However, we are maintaining our buy rating…we believe in the company’s longer-term opportunities.

* Brad Reback, CIBC World Markets: ADBE has impressively bounced back from recent weakness in [Creative Suite 2] sales through continued strength in Acrobat and is now poised to accelerate growth…While ADBE deserves its current premium valuation to group, we don’t foresee significant multiple expansion [near-term]…Maintain [Sector Performer] rating.

* Yun Kim, Pacific Growth Equities: ADBE no longer carries any material risk regarding its current state of business ahead of major new product releases…solid [fiscal third quarter] and inline [fiscal fourth quarter] guidance should dispel any concern…we believe the stock in the near-term will likely reflect the full potential of these two new major cycles…Reiterate our Buy rating.

* Walter Pritchard, Cowen: While many software investors are tied up looking at take-over plays, we believe that heading into 2007 there will be a dearth of product cycle and secular growth stories, which will work in ADBE’s favor. We expect the stock to outperform the market by 25% over the next 12 months.

* John McPeake, Prudential: We like what we saw and heard…raising estimates and target to $45 form $39….Reiterating our Overweight rating.

I could keep going, but you get the idea.

Adobe shares gained $3.85 on Friday, or more than 11%, to $37.50.

ADBE 1-year chart: