Adobe (ADBE) Earnings Preview: Priced For Perfection (June 14, 2007)

Today after the market close, we’ll see Adobe Systems Inc. (ADBE-NASDAQ) report earnings for its Q2 2007.  First Call estimates were $0.35 EPS and $728.2 million revenues.  On the earnings per share, Wall Street is used to the company either meeting or beating EPS targets by a penny.

Adobe also offers guidance usually, and next quarter expectations ar $0.40 EPS and $777 million in revenues.  They” probably go ahead and give the NOV-2007 Fiscal targets as well, and estimates are $1.48 EPS and $2.99 Billion revenues.

Shares closed Wednesday at $44.11, a hair under the $44.92 highs over the last year and well above the $25.98 lows.  Since the end of last quarter, shares are up about 12%.  The short interest from May is more than a bit dated but came in at 16.58 million shares, down from 17.7 million in April.

On average, most analyst targets that have buy/positive ratings on the stock are around $48.00, or about 9% higher than yesterday’s close.  It looks like the high valuations for the comany are mostly dependent upon ongoing Flash revenues and on their new product suites.  Adobe’s market cap is now $25.9 Billion and it trades at 29.8-times 2007 earnings estimates and more than 8-times 2007 projected revenues.

Without trying to guess the real report, it looks like Adobe is currently priced for perfection and it would seem that the stock will not tolerate anything less.  We’ll know in a few hours.  Shares are actually trading up 1% pre-market ahead of the earnings on somewhat thin trading volume.

Jon C. Ogg
June 14, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.