TheStreet.com Ratings: Digital Imaging Looks Sharp

Earlier this year we selected Adobe (ADBE Quote) as one of seven companies to own for 2007.

Like a lot of other software stocks, Adobe initially drifted downward, but it has gained back 9.2% since the beginning of the month on investor anticipation of upcoming events.

On March 20, the company reported slightly better-than-expected results. Net income was up 33% to $143.8 million, or 24 cents per share, compared with the same quarter last year.

Solid Adobe

More importantly, management claimed the franchise was solid despite customers holding off on orders until the release of Creative Suite CS3 next week.

The company reaffirmed a bullish outlook for 2007, with 15% annual revenue growth potential and slightly better operating margins of 25% to 27% for the year.

The new CS3 graphics software would be the first release in two years. This may also signal that the Macromedia acquisition is starting to bear fruit.

With this product introduction and financial community presentations next week, expect to hear a lot of buzz in the press about Adobe products.

But the full earning power of this company may not materialize for another six months. Management clearly cautioned investors to expect the bulk of product shipments to be late in the second quarter, with the third quarter seeing substantially higher revenue.

To watch Aaron Task interview Rudy Martin about digital-imaging stocks on TheStreet.com TV, click here.