Adobe (ADBE) Responds to Hacking Report (Update 1)

Updated to reflect Adobe's response. 

NEW YORK (TheStreet) -- Adobe (ADBE) has refuted a media report that up to 152 million customer accounts have been compromised by hackers. According to Reuters, cybersecurity firm LastPass found data, including email addresses and passwords, from millions of Adobe users on underground Web sites frequented by cybercriminals. 

In an email sent to TheStreet on Friday Adobe said that the reported figure of 152 million compromised accounts "does not accurately reflect the number of impacted Adobe users."

Adobe had already admitted to a lesser security violation which occurred in mid September. Initially, the software maker said that 2.9 million customers were affected, a figure which quickly grew to 38 million.

On Friday Adobe told TheStreet that it has emailed all affected users and automatically prompted a password reset. A spokesperson also said that many affected accounts were invalid and inactive and that no unauthorized activity has occurred so far.

Despite the news, shares have gained 1.9% to $54.18, leading the S&P 500's 0.82% gain.

TheStreet Ratings team rates Adobe Systems Inc as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about its recommendation:

"We rate Adobe Systems Inc (ADBE) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, solid stock price performance and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • ADBE's debt-to-equity ratio is very low at 0.22 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 2.77, which clearly demonstrates the ability to cover short-term cash needs.
  • Compared to its closing price of one year ago, ADBE's share price has jumped by 59.35%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • The gross profit margin for Adobe Systems Inc is currently very high, coming in at 92.17%. Regardless of ADBE's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ADBE's net profit margin of 8.34% is significantly lower than the industry average.
  • ADBE, with its decline in revenue, underperformed when compared the industry average of 7.8%. Since the same quarter one year prior, revenues slightly dropped by 7.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Adobe Systems Inc has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. Despite the past stability of earnings, the consensus estimate anticipates a weakening in earnings. During the past fiscal year, Adobe Systems Inc increased its bottom line by earning $1.66 a share vs. $1.65 a share in the prior year. For the next year, the market is expecting a contraction of 18.9% in earnings ($1.35 vs. $1.66).

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