Why Adobe Systems Inc. Shares Soared Today

Is Adobe Systems' jump meaningful? Or just another movement?

Jun 18, 2014 at 12:26PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Adobe Systems (NASDAQ:ADBE) touched a new all-time high early Wednesday, jumping more than 10% after the company released better-than-expected fiscal second-quarter results.

So what: Quarterly revenue rose 5.7%, to $1.07 billion, which was well above Adobe's own targeted range of $1.00 billion to $1.05 billion. That translated to adjusted earnings of $0.37 per diluted share. Analysts, on average, were only looking for earnings of $0.34 per share on sales of $1.03 billion.

Adobe also provided fiscal third-quarter guidance for sales of $975 million to $1.025 billion, and adjusted earnings per share of $0.22 to $0.28. Curiously, the mid-point of both ranges sits below analysts' average expectations for earnings of $0.27 per share on sales of $1.02 billion.

Now what: If you're wondering why the market is willing to overlook Adobe's Q3 guidance shortfall, look no further than the stellar performance of its Cloud-based software offerings. First, quarterly revenue from Adobe's Marketing Cloud grew 23% year over year, to $283 million. But the real standout was Adobe's Creative Cloud solution, which grew more than 25% sequentially, to 2.308 million subscribers. Better yet, management expects Creative Cloud sequential growth to continue accelerating through the rest of the year, culminating in the addition of another 1 million subscribers.

As a result, Adobe is now targeting $1.925 billion in annual recurring revenue from digital media products as it exits fiscal 2014. All things considered -- and even with shares currently trading at a rich 36 times next year's expected earnings -- I think Adobe Systems stock is a solid buy for long-term investors today.

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Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Adobe Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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