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Ahead of the Bell: Adobe Systems

NEW YORK (AP) -- Adobe's stock surged in premarket trading Wednesday as the software maker said that its Creative Cloud subscriptions continued to climb in its fiscal second quarter.

Late Tuesday, Adobe, which makes popular software like Adobe Reader and Photoshop, said that revenue from subscriptions surged 60 percent in the March through May period when compared with a year earlier.

The San Jose, Calif., company has been shifting its business to a subscription format. It had 700,000 paid subscriptions at the quarter's end.

Walter Pritchard of Citi Investment Research said in a client note that the transition to a subscription format will drive "a more consistent and ultimately higher baseline of revenue." The analyst increased Adobe's price target to $52 from $48 and kept a "Buy" rating.

Jefferies' Ross MacMillan said he was pleasantly surprised that Adobe's 221,000 net additions in Creative Cloud subscribers during the quarter topped his estimate for 200,000 net additions.

The analyst said that Adobe's goal for 1.25 million Creative Cloud subscribers at the end of the year now seems more achievable, and potentially even beatable.

MacMillan maintained a "Hold" rating and raised Adobe's price target to $45 from $43.

A representative for Adobe did not immediately respond to an email seeking comment.

Shares of Adobe Systems Inc. gained $3.21, or 7.4 percent, to $46.57 with 2½ hours to go before the market open.