Adobe Might Not Have Done Enough This Quarter

Shares of Adobe Systems Incorporated ADBE fell more than 4 percent after the software maker's reported revenue for the second quarter as well as the guidance for the third quarter's top line missed Street view.

For the second quarter, EPS of $0.71 was $0.03 above Street, while revenue of $1.399 billion was below Street's estimate of $1.404 billion. The company guided third quarter revenue of $1.420 billion–$1.470 billion, missing consensus view of $1.470 billion, while the median EPS outlook of $0.69–$0.75 was above Street estimate of $0.71.

Further, the company reiterated its fiscal 2016 revenue/EPS outlook of $5.80 billion/$2.80. Consensus estimate calls for earnings of $2.84 a share on revenue of $5.83 billion.

"While ADBE's F2Q results/F3Q guidance could have been cleaner, the qtr. was generally in line, in our view, after normalizing for the puts/takes in timing, which some could argue may not have been enough for a large-cap stock that trades at such a high premium," Credit Suisse analyst Michael Nemeroff wrote in a note.

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"That said, we believe ADBE's story remains intact and the company continues to have several multi-year growth initiatives ahead of it, although the current valuation premium on the stock already reflects ADBE's positive momentum and is pricing in most of the potential good news," said Nemeroff, who maintains his Neutral rating on the stock.

The analyst also maintains his fiscal 2016/fiscal 2017 revenue estimate of $5.821 billion/$7.053 billion, but raised EPS view to $2.86/$3.75 from $2.82/$3.70.

At the time of writing, shares of Adobe were down 4.95 percent to $94.78. The analyst has a price target of $105 on the stock.