Adobe Trends: Hacks vs. Short Sellers vs. Charts (ADBE)

Adobe Systems Incorporated (NASDAQ: ADBE) has quite a lot of surrounding influences around its stock, but most importantly around its products.  The company said it became aware of cyber-attacks against corporate network systems managed by it and other companies.  Adobe said it was in contact with the other companies involved and is investigating the attack, but we have no details other than that no sensitive information was stolen.  At $35.66, this stock is very close to the 52-week highs as its trading range of the last year has been $15.70 to $38.20.  The interesting notion here is that when you look at the chart, the short interest changes, and the news, all point to different direction.

As far as the short interest, here is the short interest data so far provided by NASDAQ, with settlement dates, shares short, and a change in percentages:

• 12/31/2009    12,484,691    -10.85%
• 12/15/2009    14,003,881    -14.93%
• 11/30/2009    16,462,151    -2.12%

That marks three consecutive declines in Adobe’s short interest since mid-November.  As far as the charts, you already know what the stock has done based upon its 52-week trading range.  If the Thomson Reuters figures are hit of $1.81 EPS and $3.6 billion in revenues for its Fiscal-NOV2010 year, then this trades at just under 20-times forward earnings and trades at close to 5.2-times forward revenues.  A brief look at the chart shows mixed signals, with no uptrend violations but also no major buy-signal either.  One of our affiliates at INO.com offers a free instant chart analysis on Adobe’s chart to offer current trading insights and pivot points.

Unfortunately, one of the business journals at the end of December said that Adobe may actually overtake Microsoft as a top hack-attack destination.  There has also been a spate of inside selling in recent weeks.

Adobe has become the default static document source for the globe in the last decade.  With its strong use of Flash, and its purchase of Omniture recently and Macromedia in the past has made it a staple for PC, Mac, and web users.  Many of its products have only limited competition, but in the world of software that can change overnight.  Cyber-attacks won’t disrupt the company for long here as a one-off event, but this is something that the company cannot afford to have run on endlessly.  Fortunately for it, the company can hide behind the notion that this is happening elsewhere too.

JON C. OGG
January 13, 2010