New York – Adobe Systems (NASDAQ:ADBE) is expected to report third quarter earnings after the close on Tuesday, and the consensus by analysts is that the company will report earnings per share (EPS) of $ .34 on revenue of just over $ 1 billion. However, a group of eight independent analysts from Estimize believes that EPS of $ .36 and revenues of $ 1.02 billion is likely. The difference between Wall Street analysts and independent analysts highlights an opportunity to take advantage of expectations that Wall Street might not have priced into the market.
Over the past four month, Wall Street has consistently downgraded expectations for Adobe, starting at an EPS $ .36 while Estimize has consistently raised its estimates. For investors there are reasons to believe that Estimize might be correct. Over the last eight quarters, Adobe has beaten analyst’s expectations six times, and the post earning drift has been positive for the company, on average.
Independent analyst Brad Hewitt has taken a decidedly bullish view on the company estimating an EPS of $ .37. While Robert Breza of RBC Capital raised his outlook to outperform, he expects results to come in just under expectations. According to Breza, the outperform rating is driven by his belief that the company’s subscription service will continue to expand in the quarter. ‘We are looking for 260K new Creative Cloud subscriptions in Q3/13 and 325K new Creative Cloud subscriptions in Q4/13 to end the year at 1.25M total subscriptions. We believe the subscription model is likely to accelerate in 2H/13 due to team offerings/channel contributions. In Exhibit 2, we provide a look at the trajectory of subscriber adoption of the Creative Cloud over the last six quarters.’
If this call is correct, than it would appear that Adobe is well positioned as a cloud service provider of choice as their services, creative cloud and marketing cloud, are gaining traction among users. Creative Cloud, which includes Photoshop, Illustrators, and Marketing Cloud, which helps marketing professionals manage and optimize their online campaigns.
In the lead up to the earning’s call, it would appear that several investors have the same confidence as shares in the company reached an all-time high on Monday, closing at $ 48.14. For his part, Breza believes shares can reach $ 55 in the near-term, he was previously estimating $ 52 per share.