Adobe Gets Fresh Buy Rating; UBS Names Top Picks In Software – Investor's Business Daily

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Digital media and marketing software firm Adobe Systems (ADBE) received a new buy rating as brokerage firm UBS initiated coverage of the top-ranked stock on Thursday.

UBS analyst Jennifer Swanson Lowe started Adobe at buy with a price target of 217.

Adobe was down 2.2%, near 180, in afternoon trading on the stock market today. On Wednesday, Adobe hit a record high of 184.44.

“We see revenue growing at a compound annual growth rate of 18% over the next three years, while Adobe’s efficient cost structure means 55 to 60 cents of each incremental dollar added drops through to operating profit,” Lowe said in a report. “We think the leverage in Adobe’s model is underappreciated by investors.”

San Jose, Calif.-based Adobe sells cloud-based software and services for creative professionals and marketing executives. It’s best known for products like Photoshop, Illustrator and Acrobat.


IBD’S TAKE: Adobe Systems is ranked No. 31 on the IBD 50 list of top-performing growth stocks.


Adobe is one of 13 software stocks on which UBS initiated coverage on Thursday.

Trends in information technology such as cloud computing and Big Data are providing tailwinds for U.S. software companies, Lowe said.

The market is underpricing some software stocks by not fully appreciating the expansion in their profit margins and total addressable markets, she said.

Five Software Stocks Named Top Picks

Lowe said her “top picks” in the sector are Tableau Software (DATA), ServiceNow (NOW), Salesforce.com (CRM) and Microsoft (MSFT), all rated buy.

“We prefer stocks where we think revenue or profit potential is greater than investors expect,” she said. “Companies such as Microsoft, Salesforce and ServiceNow are pushing the limits of traditional software use and creating sizable new revenue opportunities as a result.”

She put sell ratings on Workday (WDAY) and Teradata (TDC).

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