"One of our concerns on this name had been that the transition to a cloud business would pressure the company's EPS -- which has now played out as Adobe guided to FY13 non-GAAP EPS of $1.40 versus consensus of $2.35 and is likely to show gradually improving EPS as we move beyond FY13," Walravens wrote, in a note to clients.
"With the estimate cut out of the way, the most painful part of the transition may be behind Adobe, leaving the stock poised to work its way higher as the company benefits from the inherent advantages of a subscription and cloud-based model," he added.
Adobe shares rose over 5% in Friday afternoon trading, putting the company near post-crisis highs and at 2012 share gains in excess of 30%.
The software maker's share gains compare favorably to other notable tech sector turnaround efforts like Hewlett Packard, Dell and Microsoft. They even exceed stock gains of software and services giants like IBM (IBM) and Oracle (ORCL), who are widely perceived as adaptive to a fast-changing tech sector.At the IMN conference, Ubben highlighted Adobe and other large ValueAct investments, like an acquisition hungry Valeant Pharmaceuticals (VRX), as reason to cut against a general trend of cost cutting across Corporate America. "We're always fighting the last war in this age of austerity. The problem is that like people don't trust the government, they don't trust their companies," Ubben said. "The scarcity in two to three years is going to be absolute growth...
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