Adobe Systems (ADBE) Scales A New 52-Week High Of $150.65

Shares of Adobe Systems Inc. (NASDAQ:ADBE) hit a new 52-week high of $150.65 on Aug 15, before closing a tad lower at $150.41. The stock has gained 51.2% in the last one year and has added approximately 38.6% year to date.

The company’s shares have charted a solid trajectory in recent times, increasing more than 46.1% year to date, outperforming the industry’s gain of 22%.

Notably, the company has witnessed a 4.3% increase in share prices in the last two months following its encouraging second-quarter fiscal 2017 results.

Currently, Adobe holds a Zacks Rank #2 (Buy). Moreover, it has a market cap of approximately $74.2 billion. Average volume of shares traded in the last three months was roughly 2,464K.

What is Driving Adobe Systems?

One of the largest software companies in the world, Adobe, has a massive customer base that provides it with a distinct competitive edge. In fact, we believe that the company is being driven by continuous innovation in its Creative Cloud and Marketing Cloud businesses.

Notably, after its successful transition from traditional license to subscription-based services, Adobe’s strong efforts to make a place in cloud-related software in areas like Creative, documents and marketing is worth praising.

Meanwhile, the company’s Creative Cloud (CC) business has been gaining momentum. Going forward, Adobe expects to build a strong pipeline for its potential paid subscribers through marketing programs and CC software tools like Photoshop. Also, CC mobile apps are continuously driving customer traffic and strengthening customer adoption.

Additionally, consistent adoption of the Adobe Marketing Cloud might serve as a catalyst in the near term. The company’s continuous market expansion into new segments is also expected to bring in new users in the future.

In the fiscal second quarter (reported on Jun 20), Adobe’s earnings of 81 cents per share surpassed the Zacks Consensus Estimate by 4 cents. The company’s revenues also increased 5.4% sequentially and 26.7% year over year to $1.77 billion. In fact, the top line was above the Zacks Consensus Estimate of $1.73 billion.

Adobe’s better-than-expected earnings were backed by strong demand for its Creative Cloud software tools like Photoshop, which added more subscribers. Also, continued growth of Adobe Document Cloud subscriptions and strong bookings for Adobe Experience Cloud aided earnings growth.

Furthermore, it delivered an average positive earnings surprise of nearly 8.06% in the trailing four quarters.

Notably, this software company’s solid market position, its compelling product lines, strong revenue growth, continued innovation and strong long-term growth potential position it favorably. It expects to report fiscal third-quarter results on Sep 19.

For the upcoming quarter, Adobe projects revenues of $1.815 billion. Analysts polled by Zacks expect revenues of $1.81 billion. Management expects non-GAAP earnings of $1 per share. Analysts polled by Zacks predict earnings of 82 cents, lower than the guided figure.

Key Picks

Some other top-ranked stocks in the same space are Lam Research Corporation (NASDAQ:LRCX) sporting a Zacks Rank #1 (Strong Buy), and Applied Materials (NASDAQ:AMAT) and Fortive Corporation (NYSE:FTV) carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lam Research delivered a positive earnings surprise of 4.44%, on average, in the trailing four quarters.

Applied Materials pulled off a positive earnings surprise of 3.35%, on average, in the trailing four quarters.

Fortive Corporation came up with a positive earnings surprise of 5.80%, on average, in the trailing four quarters.

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