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In today's Motley Fool Take:
- Adobe Cashes In
- Shameless Plug: Motley Fool Hidden Gems
- Nike Scores Overseas
- Discussion Board of the Day: Nike
- Xbox Drops
- Quote of Note
- More on Fool.com Today
By Seth Jayson
When last we checked in with Adobe, it had updated its outlook for the first quarter, predicting bigger revenues and profits -- something that has become a welcome habit over the past few quarters. Today, it blew that update out of the water, beating the top end of the target by $18 million to post $423 million in revenue, a 43% increase year over year. Earnings of $0.50 per share beat the high end of the guidance target by 20%, and they were an incredible 127% better than last year's Q1.
Citing record revenues for its high-end electronic document services and continuing strength in sales of its Creative Suite -- which includes updated versions of perennial favorites like Photoshop and Acrobat, along with my favorite layout program, InDesign -- Adobe raised its 2004 outlook. It hopes for revenues near $1.5 billion and diluted EPS between $1.40 and $1.46. The targets represent 15% revenue growth and 30% earnings growth over last year.
The only nits to pick with Adobe might be its reluctance to share the wealth with stockholders. With $200 million in cash, $1 billion in short-term investments, and very healthy cash flows, you'd think it could up its dividend just a stitch from the current $0.0125 a quarter.
Despite the 8% jump today, putting shares near $40 per stub, Adobe trades at only 27 times forward estimates. That looks like a reasonable deal given its growth, and if an economic upturn can turbocharge its already fast-growing e-document business, the rewards will be even better.
Sh ameless Plug: Motley Fool Hidden Gems
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Nike Scores Overseas
By Seth Jayson
For its third fiscal quarter, Nike posted 21% revenue growth and earnings made a Jordan-like -- or maybe we should pass the torch and say James-like -- jump to $0.74 per share, a 57% increase. Sure, the firm had already leaked most of this good news earlier in the month, but the official release contains other interesting tidbits, like a nice 1.4% improvement in gross margins and a 0.9% reduction in SG&A expenses.
Efficiency gains like these should soothe some who wondered if Nike has lost its mind, given the amount of money it's throwing at up-and-coming spokes-athletes. In my opinion, these are valid criticisms: Even though LeBron James has put up stellar numbers, going strictly by the books, his new shoe line still doesn't take in what Nike's putting out.
In fact, footwear sales in the U.S. eked up just a single point in the latest quarter. Equipment, Nike's smallest slice of the revenue pie, grew most quickly here at home, but the total uptick still only came in at 4%. Exchange-rate roulette helped juice overseas sales, including a 36% revenue upswing in Europe, of which nearly a third was owed to currency fluctuations. In Asia, where apparel sales grew at twice the footwear rate, the overall sales increase reached 21%, half of it due to the dropping dollar.
Notice the theme? It's reprised in the firm's forward outlook. The 9.9% gain in worldwide future orders that's today's headline darling owes 40% to the funny money situation as well. That's what makes me think Nike's stock, at a P/E of 23, might be a bit expensive these days. I'm partial to its smaller, nimbler competitor Reebok
Di scussion Board of the Day: Nike
Can Nike keep its spectacular growth going? Was the $90 million price tag Nike paid to sign LeBron James worth it? You can't deny the basketball phenom is selling shoes on a par with basketball legend Michael Jordan. How does the shoe retailer stack up against rivals like Reebok, Adidas, and Puma? All this and more -- on the Nike discussion board.
Xb ox Drops
By Alyce Lomax (TMF Lomax)
It's not unusual for gamers to simulate street fights, and Microsoft's
The move is meant to take back some market share from Sony's PlayStation 2, which is currently still selling for $179. If you think back to the PlayStation 2 craze in 2000, you might recall that it not only enjoyed tons of fanfare (remember those gamers camped outside stores before launch day?), but it reached the market 18 months before the Xbox did. To this day, PlayStation 2's far and away the No. 1 console. Then, there's also Nintendo's GameCube to complicate matters.
While it's arguable that diehards already have their consoles of choice, this will entice those who may like video games but couldn't afford or justify shelling out $179. Meanwhile, especially now that Microsoft's made the move, it doesn't seem a question of if Sony will lower PlayStation 2 to the same price level, but when. Considering that neither Microsoft nor Sony plans next-generation versions for several years, right now there's hardly anything to get excited over other than the low price.
In a related note, the awaited console price cuts should drum up sales for some video game providers. Such names include Motley Fool Stock Advisor picks Electronic Arts
In last quarter's conference call (courtesy of CCBN StreetEvents), Microsoft noted Xbox growth, which offset some lagging in other areas of its home and entertainment segment. If Microsoft wants to line up loyalty for its next feature-rich, full-priced version of Xbox, now does seem the right time to strike.
Alyce Lomax does not own shares of the companies mentioned. Most of her exposure to video games is old school... think Atari. At one time, she could play a mean game of Asteroids.
Qu ote of Note
"I have not failed. I've just found 10,000 ways that won't work." -- Thomas EdisonMo re on Fool.com Today
The bust of the dot-com bubble may still be fresh in the olifactory senses of Rick Munarriz, but he's got 5 Dot-Com Bargains that survived and may be worthy of your dollars now.... And Whitney Tilson's opens up the underbelly of the investment world to expose The Disgrace of Soft Dollars. Every investor ought to know about the practice.
In other news:
- Wet Seal's Slippery Slide
- The Bagle Virus' Nasty Turn
- 3 Tasty Fund Plays
- A Royal Dutch Mess
- Boeing's Plane Plans
For a list of all our stories from today, see our Today's Headlines page.