JMP: ADBE, Maintain MO, PT $46

Adobe Systems, Inc. (1) (ADBE - $27.95; $14.6B market cap): We maintain our Market Outperform rating and $46 price target on Adobe Systems. On Wednesday, August 18, we are visiting with Adobe’s CEO, Shantanu Narayen, at the company's headquarters in San Jose. Areas we intend to explore include the tone of business, the status of the CS5 product cycle, operating margin expansion potential, and, most important, in our view, the drivers for the next stage of Adobe’s growth including monetizing Flash and expanding in the enterprise. We like Adobe’s leadership position in the creative software space and find current valuation levels attractive. We maintain our above-consensus non-GAAP EPS estimates of $1.93 in FY10 (consensus is $1.86) and $2.24 in FY11 (consensus is $2.15). Adobe is reasonably valued, trading at a 2011 PE of 13x while our price target implies a 2011 PE of 24, in line with the five-year average for Adobe.