Investors will soon wake up to the gravity of the huge miss to EPS for 2014
The San Jose, California-based company trimmed its sales and profit forecasts, underscoring the loss of income during the transition. Profit excluding some items will be 22 cents to 28 cents a share on sales of $950 million to $1 billion in the current fiscal first quarter that ends in February, the company said. That compares with the average projection for profit of 33 cents on revenue of $1.02 billion.
“No company has gone through a transition of this magnitude,” Narayen said. “We want to take the entire base and have them move over to the Creative Cloud.”
The move is sapping growth more than analysts had predicted. Net income for the fiscal fourth quarter slumped 71 percent to $65.3 million, or 13 cents a share, compared with analysts’ average estimate of 14 cents. Profit is suffering as Adobe sells fewer full versions of its desktop software priced as high as $2,600 as customers subscribe to Creative Cloud, which costs $50 a month per user.
Subscriber growth isn’t enough to deliver on Adobe’s 2016 earnings target, said Kevin Stadtler, president of Stadtler Capital Management LLC, a hedge fund in Fort Worth, Texas, that’s short on Adobe shares, or betting the stock will fall.
“Investors will wake up to economic gravity and recognize that Adobe is mispriced too high,” Stadtler said.