Will Adobe's Earnings Help Set A New Trading Range? (ADBE)

Adobe Systems Inc. (NASDAQ:ADBE) will report earnings on Monday, September 17.  First Call consensus estimates for Adobe are $0.40 EPS and $789.25 million in revenues.  The company usually offers guidance, and its earnings scheduled for the December 17 report for the quarter ending November (also fiscal year end) are currently expected to be $0.44 EPS and $843 million in revenues.  If Adobe tries to offer any implied guidance for fiscal 2008, estimates are $1.71 EPS (a 13.2% EPS growth rate over 2007 expectations) and $3.4 Billion in revenues (a projected growth rate of 12.5% over 2007 estimates).

If the market has been shifty, Adobe has weathered the storm pretty well.  Shares are shifting back and forth between positive and negative in early trading today, but the $43.30 price is just over 3% down from the 52-week highs of $44.92.  The 52-week low is $36.75.  If you smooth out the last year, Adobe has been a trading range mostly between $38.00 and $44.00.

Analysts still look more positive than negative, and it appears that the average price target is about $48.00.  It may not be fair to use options analysis a weekend ahead of time and with expiration only 1-week away, but if you had to peg the contracts on a static snapshot right now the options traders appear to be bracing only for a move of up to a range of 2% to 2.5% based upon current prices.  Frankly, options are not all that active with about 19,000 contracts in the open interest if you combine the closest in-the-money and out-of-the-money contracts ($42.50 & $45.00) for September expiration.  The closest Put options mostly offset the calls as well. Adobe’s average daily stock volume is over 6.4 million shares.

If you want to see what it showed in its ADOBE INVESTOR DAY presentation in June, you can access it here on their website.

Jon C. Ogg
September 14, 2007

Jon C. Ogg can be reached at [email protected]; he produces the 24/7 Wall St. Special Situation Investing Newsletter and does not own securities in the companies he covers.