Stock Picks: Adobe, Logitech

Adobe Systems (ADBE)

Jefferies & Co. raises target price

Shares of Adobe Systems should have more room to climb following recently announced job cuts, Jefferies & Co. analyst Ross MacMillan said Nov. 11. Adobe, best known for its Photoshop, Flash and Acrobat graphics and publishing software, said afte the close of trading Nov. 10 it will cut 680 full-time positions to align costs with its fiscal 2010 budget. The cuts represent about 9% of its work force.

MacMillan estimates the savings will add about 15 cents to 20 cents to Adobe's full-year adjusted earnings per share. He bumped his price target for the company's stock up to $40 from $37.

Though he called the jobs announcement a surprise, MacMillan said he expects additional cuts at Omniture Inc., a software company headquartered in San Jose, Calif., that Adobe bought in October. Adobe, also based in San Jose, has already cut about 108 jobs at Omniture, or 9 percent of Omniture's work force.

The latest cuts will happen at its own operations, Adobe said. The cuts come almost a year after Adobe slashed 600 jobs, or 8 percent of its workers, because of slowing sales.

Logitech International (LOGI)

Standard & Poor's Equity Research reiterates hold

Logitech, a maker of peripheral equipment for PCs, said on Nov. 11 that it had agreed to acquire privately held LifeSize Communications of Austin (Tex.) for $405 million in cash. S&P equity analyst Thomas Smith said in a Nov. 11 note that the deal, if completed as planned in December, would add high-definition video communication capabilities to Logitech's offerings. In Smith's view, it would mark a move to a faster-paced adjacent market from the webcam market where Logitech is active.

Smith maintained his earnings per share (EPS) estimates of 29 cents for fiscal 2010 (ending March), and $1.00 for fiscal 2011. He kept his 12-month price target of $20. Hewitt Associates (HEW)

Deutsche Bank upgrades to buy from hold; raises price target

Hewitt Associates is adding new contracts and its consulting revenue should get a boost as corporate spending recovers, Deutsche Bank analyst Paul Ginocchio said Nov. 11 as he upgraded the human resources consulting and outsourcing company. Revenue will increase in the coming quarters, accelerating profit growth, as the consulting business improves alongside the economy, said Ginocchio in a note to investors.

On Nov. 10, the Lincolnshire, Ill., consultancy said its fourth-quarter profit more than doubled on lower operating costs, and offered profit guidance that beat Wall Street expectations. "While we are seeing some positive signs in terms of customer demand, our guidance is not dependent on a meaningful recovery," said Russ Fradin, chairman and CEO, on Nov. 10.

Meanwhile, Hewitt is adding new clients in its HR outsourcing division, despite losing accounts to bankruptcy and mergers. That should lift the stock, Ginocchio said. He boosted his price target by $20 to $55.

Synnex (SNX)

Kaufman Bros. maintains buy

Kaufman analyst Shaw Wu said in a Nov. 11 note to investors that with about three weeks left in Synnex's November quarter, he believes the business process services company is on track to hit the upper end of its guidance range of $2.025 billion-$2.125 billion in revenue and 72 cents to 75 cents in EPS, vs. Kaufman's extimates of $2.1 billion and 76 cents and the Wall Street consensus view of $2.1 billion and 75 cents, respectively).

Wu said his sources indicate strength in several areas including PC notebooks, servers, printers, processors and HDDs where the company has strong exposure. Wu believes there is opportunity for the company to show some margin leverage based on cost discipline and a continued mix shift toward global services. He believes the company is well positioned to capitalize with its low-cost business model and expanding set of offerings.

Wu finds Synnex's valuation attractive, and sees upside potential in the share price to $34 based on what he thinks is a "reasonable and conservative" multiple of 12 times his calendar 2010 EPS estimate of $2.85.

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