Adobe Profits jump 69%, stock drops 12% in after hours trading

[Adam L]

SAN FRANCISCO (MarketWatch) - Adobe Systems (ADBE 28.98, -3.96, -12.02%)  on Tuesday reported a fiscal third-quarter profit of $230.1 million, or 44 cents a share, compared with a profit of $136 million, or 26 cents a share, for the year-earlier period. Revenue was $990.3 million, up from $697.5 million. Adjusted income was 54 cents a share. Analysts had expected the software company to report earnings of 49 cents a share, on revenue of $985.9 million, according to a consensus survey by FactSet Research. For the current quarter, the company said it expects revenue of $950 million to $1 billion.

This blurb does not explain what just happened.  See this link for a chart:  http://www.marketwatch.com/story/adobe-reports-69-profit-jump-2010-09-21?dist=afterbell

Some information has caused this stock to drop and it's not yet reported in the news.  Does anyone have insight into what may have happened?  This can't be explained by the analysts missed target, the market capitalization is to large to account for this swing.  Yes, Nasdaq went down as did the entire technology sector but Adobe did worse than these after reporting huge revenue and profitability growth.

[feppe]

Stock price is not a factor of historical performance or punishing and rewarding for missing or hitting an EPS target, but (mostly) of expectations of future performance. Adobe is expecting revenue to likely drop QoQ, which is a rather dismal expectation given Q4 is highest quarter in their business. There might be other factors in the industry and/or wider economy further weakening the outlook, thus stock price.

And while we're on the subject of analysts, their buy/sell/hold guidance is worthless. If they were any good at predicting stock price movements, they'd be on the trading floor, earning orders of magnitude more money for themselves and their employer. That's not to say traders are any good at picking winners, either...

[jeremypayne]

There's an old expression on Wall Street ...

"Buy the rumor, sell the news."

[MichaelWorley]

Weak sales forecast. Which is curious, since I think I support them all by myself.

Mike

[BernardLanguillier]

Weak sales forecast. Which is curious, since I think I support them all by myself.

Mike

Sublime irony isn't it?... Companies are being managed on a quarterly basis to please "the market"... yet the publication of good results can be seen as a bad sign...

Would Adobe stock have only dropped 5% or even increased had they posted less outstanding results? Maybe, maybe not,...

It looks like the CEOs with the vision to do real in depth business mgt re-engineering with a focus on mid/long term away from the quartely crap have some potential. Few are around as we speak though.

Cheers,
Bernard

[Slobodan Blagojevic]

... the publication of good results can be seen as a bad sign... Would Adobe stock have only dropped 5% or even increased had they posted less outstanding results? Maybe, maybe not,...

Say your bonus last year was $100K (just bear with me and imagine you work on the Wall Street). Your employer just announced that your bonus this year is going to be $150K! Good news, right? How could this then turn into bad news?

Imagine you actually expected a bonus of $200K... imagine further you already placed an order for a Lamborghini, Ferrari or Bentley of your choice. Having to cancel that order and go for a lesser car of the likes of Mercedes, BMW or Audi is the bad news, my friend.

[Slobodan Blagojevic]

... imagine further you already placed an order for a Lamborghini, Ferrari or Bentley of your choice. Having to cancel that order and go for a lesser car of the likes of Mercedes, BMW or Audi...

Speaking about the above mentioned cars, a bit of a lighthearted humor:

(To see the images larger, and especially to be able to read the text in them, click on the cars.jpeg, under the last image)

[bradleygibson]

LOL

[Philmar]

It looks like the CEOs with the vision to do real in depth business mgt re-engineering with a focus on mid/long term away from the quartely crap have some potential. Few are around as we speak though.

True. Maybe the CEOs have too many stock options riding on their performance. If they don't watch the stock performance, even in the short term, they could get stuffed by stock holders and then they'd have to cash in their options when the stock is down. Too many CEOs have stock options that compell them to think short term in case they get canned and hurt their own bottom line.