Q1 Preview: Adobe (ADBE) Awaits CS6; Flash, HTML5 Can Co-Exist...For Now

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Adobe Systems Inc. (Nasdaq: ADBE) is trading 0.6% higher ahead of the Company's first quarter earnings report, expected out after the market close Tuesday.

Adobe is expected to report EPS of $0.57 on revs of $1.03 billion. Last quarter, the Company posted EPS of $0.56 with revs of $1.008 billion, beating-out Street views calling for EPS of $0.53 and revs of $988.07 million. Looking back to the first quarter of last year, Adobe reported better-than-expected EPS of $0.45 and revs of $786.4 million.

Shares gained 21.6% through the quarter, to $34.50 at the end of February. The stock is down 5.9% since then.

Adobe is trading at a forward P/E of 12.6x FY12 EPS estimates, compared with 9.9x at Cisco Systems (Nasdaq: CSCO) and 13.5x for Oracle (Nasdaq: ORCL).

Data from Bloomberg has 12 analysts with a Buy on Adobe, 15 with a Hold, and none suggesting to Sell. The analyst price target average is $37.60, with a high of $46.00 and low of $32.00. Shares have traded in a range of $37.30 - $25.45 over the last 52-weeks.

Summary
Deutsche Bank is looking for EPS of $0.58 on revs of $1.032 billion from Adobe. Deutsche notes that "checks suggest continuing traction with CS5 and robust growth at Omniture...But with Japan accounting for ~15% of revenue, business disruption during March is likely to lead Adobe to guide 2Q modestly below consensus." Though shares are trading at a 5% discount currently, Deutsche recommends that investors buy on any signs of weakness following Q211 guidance.

Deutsche has a Buy on the shares, with price target of $43.

Wells Fargo expects Adobe to report EPS of $0.56 on revs of $1.021 billion. The firm notes that "checks show continued growth in large deals for both CS5 and enterprise product lines based on strength in year-end corporate budgets. But we expect muted guidance as four quarters have elapsed since CS5 was released. The CS5 dot release, which we expect could be released as early as next quarter, could provide some upside to FY2011 revenue growth in our view. Adobe continues to be a product cycle driven company and we expect most investors to wait for the CS6 release expected before the year-end.".

The firm thinks that Q211 guidance will be more muted due to seasonality and the CS5 cycle winding down. Additionally, "Flash continues to be an issue for investors though adds very little to the topline. We continue to expect HTML5 and Flash to co-exist for the time being with Flash used for gaming."

Wells Fargo has a Market Perform rating on the shares, with a valuation range of $30 - $33.

Adobe is expected to release their first quarter earnings on Tuesday, March 22, 2011, at approximately 4:00pm EDT. Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of their release.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: ADBE , CSCO , ORCL

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