Adobe Systems On Cloud 9 – Cloud Computing Powers Profits – Buying Suggested

Adobe Systems Inc. looks set to open the U.S session with a gap up on Wednesday after the company reported better-than-expected earnings for the third quarter following the market close yesterday.

For the fiscal quarter ending August 2016, the software company posted earnings of $270.8 million, or 54 cents per share, up from $174.5 million, or 34 cents per share for the same quarter in 2015. Excluding certain items, Adobe’s earnings per share rose to 75 cents, reaching the top end of its forecast range from 69 cents to 75 cents.

Revenue rose 20.4% on a yearly basis to $1.46 billion, thanks to record revenues of $990 million in the Digital Media Solutions segment.  Within the segment, the Creative Cloud (CC) and Document Cloud (DC) categories contributed $803 million and $187 million in revenue, respectively, reflecting the effectiveness of the focus towards adoption of cloud technology.

Shantanu Narayen, Adobe president and chief executive officer said that “Our leadership in cloud-based content and data platforms make us a mission critical partner to the world’s biggest brands as they transform how they engage with their customers.”

In a prepared statement, the California-based company’s Chief Financial Officer Mark Garrett stated that he expected “another record quarter” in the current three-month period. Garrett forecast his company’s revenues in the range of $1.55-$1.6 billion for the fiscal fourth quarter, and between $5.8 and $5.85 billion for the whole fiscal year 2016.

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Fig: ADOBE D1 Technical Chart

Adobe shares soared back above the daily moving averages yesterday, suggesting a short/medium term bottom and a reversal into an uptrend. As can be seen from the ADX chart, bears are getting weakened. While the ADX has lowered to 28.31 from the highs at 50.27, the +DI line has crossed over the –DI line from below. The RSI index has surpassed the neutral 50 line, providing confirmation for the up-trend. The price action has broken through both the MA’s from below and both MA’s should be underpinning the price moves as solid support going forward.

Trade suggestion

Buy Stop at 101.70, take profit at 104.05, stop loss at 98.50

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