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Digital media software firm Adobe Systems ( ADBE ) is expected to keep the good times rolling when it reports fiscal first-quarter earnings after the market close Thursday. Analysts polled by Thomson Reuters predict that Adobe will post earnings per share of 61 cents excluding items on sales of $1.34 billion. It would translate to year-over-year growth of 39% in EPS and 21% in sales. For fiscal Q2, analysts are modeling earnings of 65 cents a share minus items, up 35%, on sales of $1.39 billion, up 20%. Like Microsoft ( MSFT ), Adobe has earned the favor of investors through its transition from desktop software to Internet cloud computing services. Adobe has three cloud computing businesses: Creative Cloud, Marketing Cloud and Document Cloud. The biggest is Creative Cloud, which includes well-known products for creative professionals such as Photoshop, Illustrator and InDesign. Marketing Cloud provides online marketing and advertising services. Document Cloud leverages Adobe’s popular online document-sharing product Acrobat and its ubiquitous PDF format. Adobe stock was down a fraction, near 86.50, in afternoon trading on the stock market today . Adobe hit an all-time high of 96.42 on Dec. 17, just days after it reported better-than-expected fiscal Q4 earnings . UBS analyst Brent Thill on Monday reiterated his buy rating on Adobe stock with a 12-month price target of 105. In a research report, Thill said that he expects Adobe’s Q1 report to be a “solid kickoff to the year.” Investors will be focused on Creative Cloud subscribers, Digital Media annual recurring revenue and operating expenditures, Thill said. “We expect few surprises, as we think the creative/marketing spend environment was generally stable and we did not detect any significant promotions,” he said. “Macro remains a potential risk for the year, but for ADBE to get hit, we would have to see a prolonged recession, including sharp cuts to advertising & marketing budgets leading to layoffs in related staff, which we do not see as a high probability at this time.” Adobe will be better shielded from recessions than some other companies, since most of its revenue now is on a subscription basis, he said. Adobe exited fiscal Q4 with 74% recurring revenue. “ADBE remains a top large-cap growth story, with double-digit revenue growth, expanding 30%+ margins and clear leadership in its core markets,” Thill said. Rosenblatt Securities analyst Kirk Adams on Friday maintained his buy rating on Adobe stock, with a price target of 112. “We believe that their core businesses of Creative and Marketing Cloud will show strong growth in both revenues and earnings,” Adams said. “More importantly, we believe their outlook will remain strong.” Scalper1 News
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