If you've ever done anything creative on a computer -- except perhaps writing fiction -- you've seen the content creation tools Adobe
What analysts say:
- Buy, sell, or waffle? Thirty-one analyst firms follow Adobe. There are 21 buy ratings, 10 holds, and no sell recommendations. Our Motley Fool CAPS players have issued over 600 ratings on the stock, giving it a solid four-star rating.
- Revenues. Management guidance points to a $700 million to $740 million range, and the average Wall Street forecast says $728 million. That's 14% above the year-ago $635 million.
- Earnings. The official guidance zone ranges from $0.34 to $0.36 per share, and the analyst consensus falls exactly between the endpoints at $0.35 per share. That's up from $0.31 last year.
What management says:
In the last earnings report, CEO Bruce Chizen prepared us for what he called the biggest product launch in Adobe's history. More on that below. Chizen also said that he was "excited about our opportunities and bullish about our prospects for another year of strong performance."
What management does:
The slipping gross margins are hardly ideal, but they're acceptable in the light of tasty revenue growth. A similar bottom-line downtrend in margins was just reversed, but trailing dollar earnings have actually declined lately.
|
12/2005 |
3/2006 |
6/2006 |
9/2006 |
12/2006 |
3/2007 |
|
|---|---|---|---|---|---|---|
|
Gross |
94.3% |
92.4% |
91.3% |
90% |
89% |
89.1% |
|
Operating |
37% |
32.9% |
31.3% |
28.5% |
28.8% |
28.8% |
|
Net |
30.7% |
25.9% |
23.1% |
19.9% |
19.6% |
21.2% |
|
FCF/Revenue |
36.1% |
33.6% |
34.2% |
32.8% |
32.8% |
35% |
|
YOY Growth |
12/2005 |
3/2006 |
6/2006 |
9/2006 |
12/2006 |
3/2007 |
|---|---|---|---|---|---|---|
|
Revenue |
18% |
25.2% |
27% |
27.5% |
31% |
19.6% |
|
Earnings |
33.8% |
16% |
1.9% |
(14.5%) |
(16.1%) |
(2.1%) |
One Fool says:
In mid-April, Adobe released new versions of all of its most important applications, including Photoshop, Fireworks, Flash, and DreamWeaver. The slight slack in revenue growth last quarter seems to make sense when you consider that this huge batch of product updates was so close by. I suppose you could call it the Vista Effect, after the delayed system upgrades ahead of Microsoft's
Speaking of Microsoft, the Redmond rugger also chose April to release its Silverlight system-independent media platform. That's a rather direct competitor to Flash in that Silverlight is meant to power video streams in your browser -- a task for which Flash is the current market leader. Google's
But Silverlight might change all that. Akamai
Microsoft may become a threat to one of Adobe's biggest cash cows this way, but it won't happen overnight. This time, we should see a healthy sales spike thanks to the fresh product lineup.
Oh, my. Microsoft is a Motley Fool Inside Value pick, Akamai is a Motley Fool Rule Breakers recommendation, and Yahoo! and Netflix are both Motley Fool Stock Advisor selections. Here, have a Foolish bouquet of free 30-day trial passes.
Fool contributor Anders Bylund owns shares in Netflix and Google but holds no other position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure will help you find the road ahead.
