) to underweight from equal-weight.
Analyst Caroline Sabbagha says the stock is trading significantly higher than its average historical multiple, and higher than the group of both software and imaging comparables. She thinks the stock already reflects the economic recovery in 2004, and that a strong 2003 product cycle is already priced into the shares.
Sabbagha tweaked the fiscal 2004 (Nov.) earnings per share estimate by 5 cents, to $1.23, to take into account a less robust improvement in the economy than she initially had factored in. Despite high valuation, she continues to like Adobe's dominant position in its core business, and doesn't see a risk going into the third quarter. Sabbagha has a $27 target.