Adobe Systems: Morgan Stanley 'Anticipating A Seasonally Tougher Q1'

Adobe Systems Incorporated (NASDAQ: ADBE) is scheduled to report its first quarter financial results on Tuesday after market close. In a report issued Monday, Morgan Stanley analysts Jennifer Swanson Lowe and Stan Zlotsky provide a preview "anticipating a seasonally tougher first quarter."

The analysts also highlight the challenges presented by FX headwinds, declining ARPU and "a maturing model transition." They believe a "wide range of sub adds expectations may mitigate downside risks," but still think that it is unlikely that the first quarter works as a positive catalyst for the stock.

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"Despite Adobe's focus on ARR, we think the Street will continue to focus on subs in Q1. Management guided for sub adds to be "down" QoQ from 644K in Q4, but we believe the range of estimates is wide, with most investors we've spoken with expecting anywhere from 550-600K," the report stated.

Morgan Stanley expects revenues of $1.07 billion, up 7 percent year-over-year, in line with consensus of $1.085 billion and guidance of $1.05 billion to $1.10 billion. EPS are projected at $0.36, versus the Street's consensus of $0.39 and within guidance of $0.34 to $0.40.

With the stock near all-time highs, the analysts see balanced risk/reward going into the quarter and remain Equal-Weight on shares of Adobe. The price target is set at $70.

Shares closed Monday at $78.33.