Analysts Split On Adobe System Inc.'s Upcoming Q3

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Adobe Systems Inc.'s
ADBE
new versions of its flagship digital media products like Photoshop have stirred high expectations among investors, although some fear promotional pricing and lackluster results from its digital marketing segment could prove disappointing. The San Jose company posts earnings later Tuesday and at least one analyst is convinced it can meet or beat the Wall Street consensus for earnings of $0.26 per share on revenue of $1.01 billion. In June the company released the latest versions of its Photoshop, Illustrator, and Dreamweaver in the so-called Creative Cloud. Those offerings should result in a continued improvements in the products adoption as well as the retention of existing customers, Sterne Agee's Robert Breza said in a research note. Breza maintains a Buy rating and $85 target on Adobe. But RBC Capital's Ross MacMillan downgraded Adobe Tuesday to Sector Perform, on fears that promotional pricing for its creative offerings and weaker-than expected results from its marketing segment might hurt the stock. Adobe is perhaps best-know for its Digital Media that includes Photoshop and Dreamweaver. In recent quarters the company has sought to shift to a subscription-based business model from perpetual licenses Earlier this year, Adobe went whole hog and completely scrapped licensing of its creative products for the first time. But along with its long-standing creative products, in recent years the company has sharpened its focus on Digital Marketing that provides products and services for on-line advertisers. Since posting strong quarterly results in June, Adobe shares have gained more than 5 percent compared with more than 7 percent for the entire NASDAQ. Breza figures strong Creative Cloud subscriber growth will drive the company's Digital Media segment, while growing demand for analysis of mobile-based advertising will enable its marketing segment to post strong results. Adobe recently traded at $70.78 a share, up 0.7 percent.
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