FBR initiated Adobe (ADBE) with an Outperform rating and a target of $48. In the past ADBE has been driven by its product cycles and FBR thinks the same will be true this time around:
New CS4 product cycle to fuel growth:
We expect CS4 to benefit from customers’ continued preference for suite purchases, an extremely loyal customer base, and ADBE’s ability to innovate continuously and deliver “must have” new releases.
Analysis of past product cycles bodes well for ADBE shares:
ADBE has very much been a product-cycle-driven stock, and we expect the correlation to continue. When analysing past CS cycles, two noticeable trends are evident. The (1) trough-to-peak movements and (2) P/E multiples for past CS cycles suggest that attractive share appreciation exists from current levels.
FBR also believes street expectations are too conservative because potential new revenue models such as subscription pricing or tiered pricing aren’t being factored in. New growth drivers could also power the stock as ADBE takes “advantage of the flood of dynamic media content” and becomes “a pioneer in the advent of rich Internet applications (RIA).”
FBR initiates OUTPERFORM for Adobe (ADBE), target $48.