CIBC World Cuts Adobe to Sector Perform

Analyst Brad Reback notes concerns about a slowdown in demand

CIBC World downgraded Adobe Systems (ADBE) to sector perform from outperform, citing concerns about a slowdown in demand highlighted by the company in a mid-quarter update.

Analyst Brad Reback notes that given slowing near term demand and valuation, he sees few catalysts to move the stock price higher. He still believes the company is well-positioned for long term growth via its product development, integration of Macromedia assets, and other factors. But with slowing demand, as well as Acrobat & CS product cycles still months away, he is taking a less aggressive stance on shares. He cut his $669 million second quarter revenue estimate to $641.5 million, his 31 cents earnings per share (EPS) estimate to 30 cents, his $2.698 billion fiscal year 2006 (ending Nov.) revenue estimate to $2.6 billion, and his $1.28 EPS estimate to $1.24.

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