Analysts See Near-Term Pressure On Adobe Systems Inc.

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Adobe Systems Inc.'s
ADBE
disappointing growth in the number of subscribers to its cloud-based services will put continued pressure on the shares, an analyst said Wednesday. "It's likely to be an overhang in the near-term," said Pacific Crest's Brenden Barnicle, who nonetheless maintained an Outperform rating and $85 target. The maker of PhotoShop and Acrobat Reader software saw its shares tumbled Wednesday more than 4 percent to $76.36 after posting first-quarter results late Tuesday. Barnicle attributed subscriber weakness to "seasonality" and noted that a similar dynamic played out with the company's performance during the same period in 2014. But subscriber growth may falter during the remainder of 2015, according to Morgan Stanley's Jennifer Swanson Lowe. The most engaged and least price-sensitive users have already become subscribers, Lowe said, suggesting that growth could therefore slow down. A key Wall Street expectation calls for accelerating subscriber growth through 2015, according to Lowe, who maintained an Equal Weight rating on the shares and $70 target. Yet Jeffries analysts Brad Zelnick and John DiFucci said Acrobat Reader revenue is "the most important indicator of momentum" for Adobe. The two analysts maintained a Buy rating and $90 target, noting that reader segment revenue grew 88 percent to $2.09 billion. Deutsche Bank's Nandan Amladi reiterated a Buy rating and $85 target. Adobe maintained its full-year guidance Tuesday, allowing "headroom" for upside surprises, Amladi said.
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