Adobe shares tumble after outlook disappoints
On Wednesday September 22, 2010, 2:56 pm
NEW YORK (AP) -- Shares of Adobe Systems Inc. plunged in heavy trading Wednesday after the software maker posted a weaker-than-expected revenue outlook for its fiscal fourth quarter.
THE SPARK: Adobe, which is behind such software as Photoshop and Illustrator, reported a stronger-than-expected third quarter on Tuesday. But weakness in Japan and in the U.S. education market led the company to give a revenue outlook below analysts' forecasts.
THE BIG PICTURE: Investors punished Adobe's shares, though several analysts said the company's longer-term prospects remain solid as the economy recovers. Others, however, downgraded Adobe. Zaineb Bokhari of Standard & Poor's Equity Research cut her rating to "Hold" from "Strong Buy."
Credit Suisse's Philip Winslow also downgraded the company to "Neutral" from "Outperform" and lowered his price target to $32.50 from $39.
THE ANALYSIS: Winslow said he struggles to find catalysts for the company's stock and added he expects Adobe to report "massively decelerating revenue growth for the next 4 quarters." He also noted that the company's revenue in its Creative Solutions business, which includes its flagship Creative Suite software package, was below analysts' expectations for the third quarter.
SHARE ACTION: The San Jose, Calif.-based company's shares tumbled $6.34, or 19 percent, to $26.60 in afternoon trading. Earlier, the stock hit a 52-week low of $25.81.
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