Ahead of the Bell: Adobe shares rise in premarket

Adobe shares get a boost from strong 4th-quarter results helped by subscriber increase

Associated Press

NEW YORK (AP) -- Shares of Adobe, which makes Photoshop photo-editing software, rose before Friday's opening bell after the company's September-November quarter bested analysts' expectations.

Some analysts are also optimistic about the potential of the company's new subscription service to boost revenue down the road, even though the company's outlook for 2013 fell far short of Wall Street expectations.

Adobe Systems Inc. added 10,000 subscribers per week to its Creative Cloud online subscription service during the fiscal fourth quarter, up from 8,000 per week in the previous three months.

The software maker is shifting its business model to more subscriptions from downloads or physical software packages. The company hopes that doing so will help Adobe generate higher long-term revenue growth, although it forecast that earnings and revenue would drop in 2013 as it transitions.

Demand remains strong for Adobe's products despite the weak economy, said Citi analyst Walter Pritchard, and the company raised its goal for subscribers. He said the lower-than-expected outlook for the year ending in November 2013 was due to the company's willingness to "push more aggressively" to the subscription model.

Pritchard, who has a "Buy" rating on Adobe, raised his target price on the shares by $4 to $42.

But Janney Capital Markets analyst Richard Fetyko cut his rating for the stock to "Neutral" from "Buy," citing worries about increasing costs. He said the benefits of the move to Creative Cloud were already reflected in Adobe's shares, which have gained 34 percent over the past 12 months.

The San Jose, Calif., company said Thursday that it posted an adjusted profit of 61 cents per share on revenue of $1.15 billion in the quarter ended Nov. 30. Analysts polled by FactSet expected profit of 56 cents per share on $1.1 billion in revenue.

For fiscal 2013, it expects adjusted profit of $1.40 per share on revenue of $4.1 billion. Wall Street had expected earnings of $2.37 per share on revenue of $4.46 billion.

Adobe stock rose $1.78, or 5 percent, to $37.31 in premarket trading Friday.

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