Shares of Adobe Systems and Salesforce took flight Monday after influential Goldman Sachs analyst Sarah Friar upgraded both stocks, citing strong sales and margin improvements in the near future.
Adobe (NASDAQ: ADBE) shares rocketed up $1.93 a share, or 5 percent, to a 52-week high of $36.58 after Friar raised the stock from a “neutral” rating to “buy” and setting a new 12-month price target of $42 a share.
In her research note, Friar said Adobe offers “a compelling investment case” thanks to the forthcoming launch of Creative Suite 5.
She added that a new PC refresh cycle and operating system upgrades from both Microsoft and Apple should boost Creative Suite 5 sales and that there is now a buying opportunity in the stock created mainly from the uncertainly surrounding the company’s blockbuster $1.8 billion acquisition of Web traffic measurement and optimization software maker Omniture in September.
Friar expects the San Jose, Calif.-based company to enjoy improved profit margins as total revenue accelerates beyond current guidance and raised her November 2010 earnings-per-share estimate to $1.59 from $1.48.
A cautious nod to Salesforce
After Friar’s upgrade, 12 of the 25 analysts covering the company maintain either a “buy” or “strong buy” recommendation.
Meanwhile, Salesforce (NYSE: CRM) shares rallied up $2.41 a share, or 4 percent, to $63.42 in late Monday afternoon trading after Friar finally relented and upgraded the stock from a “sell” recommendation to “neutral” and setting a price target of $61 a share—exactly where the stock closed on Friday.
Friar, in her research note, said the Software-as-a-Service (SaaS) leader “seems to be hitting a mature phase for its business model” and recent transactions data suggest the company is in line for a “solid” October quarter.
She also said the company’s Dreamforce conference next week should underscore the company’s “dominant position” in cloud computing and SaaS but cautioned that the stock is trading at an extremely high valuation and faces a “variety of competitive threats.”
Before Monday’s upgrade, Friar was the lone analyst of the 32 tracking the stock to rate Salesforce a “sell.” Now, 16 of the 32 analysts rate it either a “buy” or “strong buy” with 15 maintaining either a “hold” or “neutral” recommendation.
One analyst has assigned the stock an “underperform” rating.