ADBE - Adobe Systems - Company Profile

Adobe Systems Incorporated operates as a diversified software company worldwide. Its Digital Media segment provides tools and solutions that enable individuals, small and medium businesses, and enterprises to create, publish, promote, and monetize their digital content. Its flagship product is Creative Cloud, a subscription service that allows customers to download and install the latest versions of its creative products. This segment serves traditional content creators, Web application developers, and digital media professionals, as well as their management in marketing departments and agencies, companies, and publishers. The company's Digital Marketing segment offers solutions for how digital advertising and marketing are created, managed, executed, measured, and optimized. This segment provides analytics, social marketing, targeting, media optimization, digital experience management, cross-channel campaign management, audience management, and video delivery and monetization solutions to digital marketers, advertisers, publishers, merchandisers, Web analysts, chief marketing officers, chief information officers, and chief revenue officers. Its Print and Publishing segment offers products and services, such as e-learning solutions, technical document publishing, Web application development, and high-end printing, as well as publishing needs of technical and business, and original equipment manufacturers (OEMs) printing businesses. The company markets and licenses its products and services directly to enterprise customers through its sales force, as well as to end-users through app stores and through its Website at adobe.com. It also distributes products and services through a network of distributors, value-added resellers, systems integrators, independent software vendors, retailers, and OEMs. The company was founded in 1982 and is headquartered in San Jose, California. Company description from FinViz.com.

Adobe reported earnings of $1.66 compared to estimates for $1.54. Revenue of $2.20 billion beat estimates for $2.16 billion. They guided for the current quarter for earnings of $1.68 on revenue of $2.24 billion. Analysts were expecting $1.61 and $2.23 billion. Adobe said it would have a 7% tax rate in Q3/Q4. They guided for 25% growth in Q3 in the Digital Media division, which contributes 70% of revenue. Analysts were expecting 23.4%.

Shares declined after the company said Q3 is seasonally weak but Q4 is seasonally strong. The new acquisition, Magneto, is expected to contribute $40 million in revenue in those two quarters.

They recently partnered with Microsoft and this is expected to provide a significant boost to revenue and earnings in the coming year.

Earnings are September 13th. I hesitated to jump into this position ahead of earnings less than a month out but the stock is depressed and expectations are low. There is a chance for a positive surprise.

Adobe options are very expensive and I am only going to reach out to January. We have to take small bites in this stock over the next 18 months.

Buy Jan $260 call, currently $11.85, initial stop loss $232.85.
Sell short Jan $285 call, currently $4.60, initial stop loss $232.85.
Net debit $7.25.


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