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Bear of the Day

Adobe Systems' (ADBE) fourth quarter earnings exceeded the Zacks Consensus Estimate on higher revenue. However, the subscription service will hurt Adobe's revenue growth in the short term as it brings in revenues on a monthly basis instead of an upfront payment.

Hence, we are downgrading our recommendation on Adobe shares from Neutral to Underperform. Adobe lowered its fiscal 2013 guidance from $4.4 billion to $4.1 billion, considering the faster uptake the of Creative Cloud subscription model.

Also, lower end-market demand will impact earnings in the near term. We believe that this is the result of weak global economic conditions, the unwillingness of the user to spend on the modified Acrobat software, among other things.

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