Businesses will likely spend more on software this year, as the global economy continues to recover. That’s good news for two market leaders we cover regularly in our advisory on U.S. stocks, Wall Street Stock Forecaster. We analyze which is in a better position to benefit as more companies adopt cloud computing. Note: This article updates our recent report on Symantec, issued just after the company had fired its CEO (see the article here).
ADOBE SYSTEMS INC. (Nasdaq symbol ADBE; www.adobe.com) earned $151.3 million, or $0.30 a share, in its fiscal 2014 first quarter, which ended February 28, 2014. That’s down 14.9% from $177.9 million, or $0.35, a year ago. Revenue fell 0.8%, to $1.00 billion from $1.01 billion.
The declines are mainly because Adobe is now selling its Creative Cloud package of photo-editing and desktop-publishing programs as a subscription instead of a one-time purchase. That hurts the company’s short-term growth, but it should provide stable revenue streams as more users switch over. Subscriptions now supply over half of Adobe’s revenue.
The company spends 21% of its revenue on research.
Tech stocks: Symantec sees earnings rise, revenue decline in fourth quarter
SYMANTEC CORP. (Nasdaq symbol SYMC; www.symantec.com) sells antivirus software and other computer security services.
In Symantec’s fiscal 2014 fourth quarter, which ended March 28, 2014, its earnings rose 4.1%, to $329 million from $316 million a year earlier. Per-share earnings rose 6.8%, to $0.47 from $0.44, on fewer shares outstanding.
The gains were mainly due to savings from a new restructuring plan that includes job cuts and simplifying the company’s product lines. Revenue fell 5.6%, to $1.65 billion from $1.75 billion.
Symantec’s stock has recovered some of the ground it lost due to investor uncertainty after Symantec fired its CEO in March 2014 over the slow progress of its restructuring. The company continues to operate with an interim CEO.
Symantec spends a high 17% of its revenue on research, which helps it adapt to rapidly changing technologies like cloud computing. In addition to preventing viruses and other attacks, it is also working on products that help clients recover data from infected computers.
Higher revenue will help the company increase its gross profit margin (gross profits as a percentage of revenue) from 27.5% in the latest quarter to at least 30% in the fourth quarter of fiscal 2015.
In the latest edition of Wall Street Stock Forecaster, we look at Adobe’s earnings outlook in light of its very high research spending and its heavy dependence on cyclical businesses like publishing. We also look at Symantec’s prospects and the impact of its restructuring plan. We conclude with our clear buy-hold-sell advice on these two stocks.
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Businesses will likely spend more on software this year, as the global economy continues to recover. That’s good news for two market leaders we cover regularly in our advisory on U.S. stocks, Wall Street Stock Forecaster. We analyze which is in a better position to benefit as more companies adopt cloud computing. Note: This article updates our recent report on Symantec, issued just after the company had fired its CEO (see the article here).
