Adobe: Graphic Gains

12/22/2015 8:00 am EST


Leo Fasciocco

Investment Columnist and Publisher, Ticker Tape Digest

Our latest featured breakout recommendation provides graphic design, publishing, and imaging software for Web and print, explains Leo Fasciocco, technical specialist and editor of Ticker Tape Digest.

Adobe (ADBE) licenses its industry-standard technologies to major hardware manufacturers, software developers, and service providers.

Technically, the daily chart shows the stock climbing from $72 back in August to a peak near $90 by November. It then went into a basing pattern above its rising 50-day moving average line. That is a bullish set-up.

The stock has risen 28% over the past 12 months, versus a gain of 3% for the S&P 500 index. It has now broken out from a seven-week flat base. The move carries ADBE to a new all time high. That is bullish and could draw in more buying.

Meanwhile, ADBE is poised to show very strong earnings growth. Earnings for the upcoming fiscal first quarter ending in February should surge 80% to 49 cents a share form 27 cents the year before.

Analysts expect net for the fiscal year ending in November 2016 to jump 48% to $2.16 a share from $1.46 a year ago. The p/e ratio is 43; that is high but okay given the earnings growth rate this year and next.

Looking ahead to fiscal 2017 ending in November, the Street is forecasting a 44% leap in profits to $3.10 a share from the anticipated $2.16 this fiscal year.

Institutional sponsorship is very good. The largest fund buyer recently was the 5-star rated Fidelity Contrafund, which purchased 619,400 shares.

We are very bullish on Adobe. We are targeting the stock for a move to $110 off this breakout. A protective stop can be placed near $89.

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