Adobe Systems downgraded to "neutral"

10/28/03 - Robert W. Baird

NEW YORK, October 28 (New Ratings) - Analysts at Robert W Baird downgrade Adobe Systems Inc (ADBE) from "outperform" to "neutral." The target price is set to $44.

Shares of Adobe Systems, a world leader in business communications through digital imaging, design and document technology, are currently trading at $42.04.

According to Robert W Baird’s research note published this morning, Adobe Systems recently announced its Q4 EPS guidance in-line with the consensus and the estimates. However, the analysts say that the company’s FY2004 revenue and EPS guidance is ahead of the estimates. According to Robert W Baird, the company has consistently met its guidance, despite the dull economy and a challenging environment. Compared to companies like Microsoft, Adobe Systems’ performance has been far more stable, the analysts add.

The analysts believe that Adobe Systems has improved its business profile by including enterprise solutions services. As a result, the company’s long-term growth outlook is positive. According to the analysts, the company’s product mix and price hike are likely to boost its revenue growth in 2004. The analysts point out, however, that the company's stock is trading close to the price target of $44, warranting the current downgrade in rating.

The EPS estimates for 2003 is $1.12, while the EPS estimate for 2004 has been raised from $1.24 to $1.26. The P/E estimates for 2003 and 2004 are 37.5x and 33.4x, respectively.

Robert W Baird downgrades Adobe Systems Inc from "outperform" to "neutral."