Shares of Adobe Systems Inc. ADBE hit a new 52-week high of $139.2 on May 22, before closing a tad lower at $138.8.

The company’s shares have charted a solid trajectory in recent times, increasing more than 39% in the last one year, ahead of the Zacks Computer Software industry’s gain of roughly 26.2%.

Notably, the company has witnessed a 9.3% increase in share prices in the last two months following its encouraging first-quarter fiscal 2017 results.

Currently, Adobe Systems holds a Zacks Rank #3 (Hold). Notably, the company has a market cap of $68.7 billion.

What is Driving Adobe Systems?

One of the largest software companies in the world, Adobe Systems’ massive customer base provides it with a distinct competitive edge. We believe that the company is being driven by continuous innovation in its Creative Cloud and Marketing Cloud businesses.

After its successful transition from traditional license to subscription-based services, Adobe’s strong efforts to make a place in cloud-related software in areas like Creative, documents and marketing is worth praising.

The company’s Creative Cloud (CC) business has been gaining momentum. Adobe expects to build a strong pipeline for its potential paid subscribers through marketing programs and CC software tools like Photoshop. Also, CC mobile apps are continuously driving customer traffic and strengthening customer adoption.

Moreover, consistent adoption of the Adobe marketing cloud could serve as a catalyst going forward. Also, Adobe’s continuous market expansion into new segments is expected to bring in new users in the future.

In fiscal first quarter, results of which were reported on Mar 17, Adobe’s earnings of 78 cents per share beat the Zacks Consensus Estimate by 6 cents. Also, Adobe’s revenues increased 4.6% sequentially and 21.6% year over year to $1.68 billion and were above the Zacks Consensus Estimate of $1.641 billion.

Better-than-expected earnings were backed by strong demand for the company’s Creative Cloud software tools like Photoshop, which added more subscribers. Also, continued growth of Adobe Document Cloud subscriptions and strong bookings for Adobe Marketing Cloud aided the earnings growth.

Additionally, Adobe Systems delivered an average positive earnings surprise of nearly 7.71% in the trailing four quarters. The company’s solid market position, its compelling product lines, strong revenue growth, continued innovation and strong long-term growth potential position it favorably.

The company expects to report fiscal second-quarter results on Jun 20.

For the upcoming quarter, the company projects revenues of $1.73 billion. Analysts polled by Zacks expect revenues of $1.73 billion, in line with the guided figure. Management expects Non-GAAP earnings per share of 94 cents. Analysts polled by Zacks predict earnings of 77 cents.

Adobe Systems Incorporated Price and Consensus

Adobe Systems Incorporated Price and Consensus | Adobe Systems Incorporated Quote

Stocks to Consider

Some better-ranked stocks in the broader technology sector include KLA-Tencor KLAC and Applied Materials AMAT, each sporting a Zacks Rank #1 (Strong Buy), while Advanced Energy Industries, Inc. AEIS, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

KLA-Tencor delivered a positive earnings surprise of 11.55%, on average, in the last four quarters.

Applied Materials delivered a positive earnings surprise of 3.35%, on average, in the trailing four quarters.

Advanced Energy Industries, Inc. delivered a positive earnings surprise of 10.46%, on average, in the trailing four quarters.

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