An abode for Adobe in your portfolio

ABHISHEK is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Adobe Systems Inc. (NASDAQ: ADBE)  offers a line of creative, business, web and mobile software and services used by creative professionals, knowledge workers, developers, marketers, enterprises and consumers. It published quarter 4 results currently and posted the revenue of $ 4.404 billion. Adobe beat its Creative Cloud subscription goals and established Adobe Marketing Cloud as the leader in the exploding category of Digital Marketing during fiscal 2012.

Financial Results

Adobe achieved record breaking revenue of $ 4.404 billion.  Annual GAAP diluted earnings per share for fiscal 2012 were $1.66 and Annual operating income was $1.180 billion. Further its net income was $833 million. Creative Cloud paid subscriptions grew to 326,000 as at the end of the year, with exiting annualized recurring revenue of $153 million for the Creative business. Moreover Document Services achieved annual revenue of $786 million. Adobe Marketing Cloud achieved a record $777 million in reported annual revenue which represents growth of 35 percent year-over-year . Moreover,the Company repurchased 11.5 million shares during the year, returning approximately $372 million of cash to its investors.

Future outlook

In fiscal 2013, the intentions of Adobe is crystal clear to accelerate its pace of innovation, and drive integration between Creative Cloud and Adobe Marketing Cloud. It is also driving migration to a subscription model in Creative business faster which will yield a stronger revenue with higher long-term growth in it. However, the Company forecasts a Weaker adjusted earnings of about $1.40 a share on revenue of about $4.1 billion for 2013. Rapid adoption of subscription service tends to lower revenue collection for the Adobe in the days to come.But the Company is expected to grow after this PIVOTAL YEAR that is 2013.

Competitor Analysis

Apple Inc. (NASDAQ: AAPL)   Shares dropped below $500 for the first time since February as the demand for the iPhone5 slowed. Apple's shares which was once among the most desirable share for one's portfolio,which now have headed steadily lower since September because of growing uncertainty about the company's ability to defend unprecedented competition. Further this year Amazon.com Inc. (NASDAQ: AMZN) saw a surge in sales of its product Kindle Fire and Microsoft Corp's (NASDAQ: MSFT) first foray into the tablet market with its Surface. Meanwhile, Samsung continues to chip away the ipad’s dominance with its Galaxy line.  Apple and Adobe have entered into agreements that have prevented the companies from directly soliciting each other’s employees, and thus restraining competition between them for highly skilled employees. Moreover the company is facing patent disputes from its rivals which has infused negative sentiments among prospective investors. However the anticipated launch of Apple’s Smart TV will help to boost some positive results for Apple without second thought.

Microsoft Corporation (NASDAQ: MSFT) develops and markets software, services, and hardware that deliver new opportunities and greater convenience. It reported its quarter I results which was flat year-over-year at $17.4 billion reflecting solid growth in multiyear licensing, but a slowdown in transactional revenue. The Launch of Microsoft Windows 8 and tablet Surface may have increased its earning potential. Microsoft shares have touched new lows due to decline in its sale of PCs.

Long or Short

Shares of Adobe have risen 40% over the past twelve months,thereby outperforming the tech sector by a wide margin. The stock trades at 15.8 times’ forward earnings and has the PEG ratio of 1.46.Although it did not pay dividend to its investors in the past days,the Quarterly and Yearly performance have been quite impressive. Moreover, the integration between the creative cloud and the marketing cloud will also generate positive results. Moreover acquisition of Efficient Frontier will further enhance its Adobe Marketing Cloud. Therefore, going Long on Adobe is a good decision.

 


abhishekjain524 has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Amazon.com, and Microsoft. Motley Fool newsletter services recommend Apple, Adobe Systems, Amazon.com, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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