Ahead of the Bell: Adobe Systems

A Deutsche Bank analyst upgraded Adobe Systems Inc. to "Buy" from "Hold" Tuesday after the software maker posted a 21 percent jump in fourth-quarter profit on record sales.

Analyst Tom Ernst Jr. said a 2.7 percent drop in shares in aftermarket trading Monday creates an "attractive entry point," and encouraged investors to see the long-term potential in Adobe's Creative Suite 3 software, and new releases in 2008.

"We believe large-cap software investors will view Adobe as a safe alternative to companies with large enterprise spending exposure" due to its lower average selling price, Ernst said in a client note. He raised his price target to $52 from $49.

While some may view the dip in fourth-quarter margins as reason to sell, the earnings and first-quarter guidance cleared up any misconceptions about performance, he said. For the first quarter, Adobe expects earnings of 44 cents to 46 cents per share compared to analysts estimates of 42 cents per share, according to a poll by Thomson Financial.

Jefferies & Co. analyst Ross MacMillan said the company's fourth-quarter results were "solid," but worried that guidance for 2008 guidance was not raised, especially after a boost to first-quarter 2008 guidance.

Analysts expect profit of $1.82 per share for 2008, while MacMillan expects profit of $1.90 per share.

"Adobe is not recession-proof, but we do think the company is demonstrating a certain level of resilience to any current slowdown and the stock is partly defensive in the current environment given the product cycle," MacMillan said in a client note. He kept his $50 price target and "Buy" rating.

Shares rose 8 cents to $40.98 in premarket trading.