Option Trade 
Adobe Systems Incorporated (NASDAQ:ADBE) Calls 
Tuesday, 20th September, 2016

** OPTION TRADE: Buy the ADBE JAN 20 2016 105.000 call at approximately $3.50. Place a pre-determined sell at $7.00.

Note: No protective stop losses added -- but if you wish to do so make it $1.40.

by Ian Harvey

September 20, 2016

Adobe Systems Incorporated (NASDAQ: ADBE), a San Jose, Calif.-based software products and services provider for professionals, marketers, application developers, enterprises and consumers, is expected to continue its run of strong sales and earnings growth when it reports fiscal Q3 results today, after the market closes.

Photoshop maker Adobe Systems has touched up its image with a successful transition to cloud computing services. And investors have rewarded the company by pushing its stock to record levels.

The media and marketing software company is expected to continue its run of strong sales and earnings growth when it reports fiscal third-quarter results after the market close on Tuesday.

Analysts expect the San Jose, Calif.-based firm to earn 72 cents a share excluding items, up 33% year over year, on sales of $1.45 billion, up 19%.

It would be the eighth straight quarter of double-digit EPS growth and fifth quarter in a row of double-digit sales gains.

For Adobe's fiscal Q4, Wall Street is modeling for the company to earn 78 cents a share excluding items, up 26%, on sales of $1.57 billion, up 20%.

UBS analyst Brent Thill on Tuesday reiterated his buy rating on Adobe stock with a 12-month price target of 122.

Adobe Systems Inc. has a 50-day moving average of $100.22 and a 200-day moving average of $96.05. Adobe Systems Inc. has a 52 week low of $71.27 and a 52 week high of $104.16. The stock has a market cap of $49.30 billion, a P/E ratio of 55.89 and a beta of 1.24.

Why Adobe Systems?

Adobe is being driven by continuous innovation in the Creative Cloud and Marketing Cloud businesses.

The Creative business under the Digital Media Solutions segment is seeing acceleration in Creative Cloud subscriptions. Also, the conversion of enterprise customers to Enterprise Term License Agreements (ETLAs) is resulting in higher adoption of its enterprise Creative Cloud offering.

Increased subscription as well as ETLA and digital publishing suite adoption should drive Creative's annualized recurring revenues.

Also, there is a great deal of positive feeling in regard to Adobe's market position, compelling product lines and balance sheet strength. In addition, it is believed that continued adoption of the Adobe marketing cloud could serve as a catalyst in the to-be-reported quarter.

Adobe posted strong fiscal second-quarter results with both earnings and revenues beating the Consensus Estimate. Revenues were up 1.1% sequentially and 20.4% year over year on the back of strong adoption of Creative Cloud.

Analyst Input

Adobe Systems Inc.’s stock had its “outperform” rating reissued by stock analysts at Cowen and Company in a note issued to investors last Friday. They currently have a $115.00 price target on the software company’s stock. Cowen and Company’s price objective points to a potential upside of 16.24% from the stock’s current price.

Also, several other equities research analysts have recently commented on the company.

• Barclays PLC increased their price target on shares of Adobe Systems to $75.00 in a research report on Tuesday, June 7th.

• Citigroup Inc. cut their price target on shares of Adobe Systems from $117.00 to $114.00 and set a “buy” rating on the stock in a research report on Wednesday, June 22nd.

• Deutsche Bank AG reiterated a “buy” rating and issued a $120.00 price target on shares of Adobe Systems in a research report on Wednesday, June 22nd.

• Canaccord Genuity reiterated a “buy” rating and issued a $110.00 price target on shares of Adobe Systems in a research report on Wednesday, June 22nd.

• Finally, Rosenblatt Securities increased their price target on shares of Adobe Systems from $112.00 to $120.00 and gave the company a “buy” rating in a research report on Wednesday, June 22nd.

Eight investment analysts have rated the stock with a hold rating and twenty-two have assigned a buy rating to the company’s stock. Adobe Systems presently has a consensus rating of “Buy” and an average price target of $105.20.

Harvey’s Options Volatility Indicator

Conclusion

Therefore, based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..

** OPTION TRADE: Buy the ADBE JAN 20 2016 105.000 call at approximately $3.50. Place a pre-determined sell at $7.00.

Note: No protective stop losses added -- but if you wish to do so make it $1.20.

”Success is simple. Do what's right, the right way, at the right time.”

Option Tip for your Success!
Options traders are not successful because they win.
Options traders win because they are successful.



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