Reuters Insider - At the Open: Adobe Unlikely to Deliver Growth, Says Kozey
13/06/2016 10:59
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Source: Thomson Reuters
Description: Reuters Equities Analyst John Kozey says you might
have another Oracle on your hands with Adobe
unlikely to outperform the S&P 500, despite the
company's strong outlook.
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Transcript (May be auto-generated)
Here's what's making news at the US open. A bit more detail emerging from that
explosive device found in the Rome underground. The device was found by a train
driver in a marshalling yard near the Rebibbia metro station at around 0900 GMT
this morning. That's according to officials in Rome. It's not known at this
point if the device has since been defused. We'll have more as details emerge.
Meanwhile, US stocks rising across the board at the open and are set to move
towards fresh highs.
Investors optimistic after some positive results from the tech sector and
mergers are also lending some support. S&P 500 has rallied nearly 6% so far this
month and is up 21% from its low for the year. Shares of Adobe are up higher
after a positive outlook. But Reuters Equities Analyst John Kozey sees this
stock through less rosy glasses. John, what's your concern about Adobe here?
Well Dan, it's the same concern that we had on Friday about Oracle. These are
stocks that are delivering less than market earnings growth rates in the long
run. The S&P is expected to grow earnings at around 11.3%. Adobe's is under 9%
so was Oracle's. So I'm looking at stocks that would have more attractive growth
rates. For the most part, these are in the smaller cap tech sector. They include
Arrow Electronics, $4 billion market cap, NCR $2 billion market cap, ON
Semiconductor, $4 billion and Texas Instruments $37 billion market cap. But for
the most part, you need to be looking at lower market cap stocks in the IT
sector to get these above S&P growth rates. Alright, thanks John. And Adobe up
about 6% in the first couple of minutes trading right at about $31 a share.
Well the deals are also helping fuel the gains here on Wall Street. TD bank to
buy Chrysler Financial for $6.3 billion. TD says it does not intend to issue
common equity in connection with the deal. Shares of Martek Biosciences are
surging. We'll check on the specifics in a minute but the Dutch group DSM is
buying the US baby foods ingredient maker for about o $1.1 billion or $3,150
share. That's a 35% premium based on Martek's closing price on Monday. And
shares of Massey Energy up about 1%. Alpha Natural Resources had made an offer
to buy the US coal miner according to the Wall Street Journal. Alpha Natural
Resources made an offer for rival coal miner Massey, citing Massey has a market
capitalization of about $5.2 billion. The Euro is erasing some of its earlier
gains after Moody's put Portugal on review for a possible downgrade. One
currency analyst told Reuters this announcement on its own will be capable of
knocking Euro-Dollar out of its range. And in 45 minutes, the Fed kicks off
another round of bond-buying. Today's schedule for the Fed has it shopping in,
for about $7 billion to $9 billion of notes in the belly of the curve with
maturities between June 2016 and November 2017 and for $1 billion to $2 billion
TIPS. Purchase window closed at 11AM and Insider will break down the details of
the Fed's purchases later in today. And if you're traveling to London this
holiday season, British Prime Minister David Cameron says the second Heathrow
runway will be opening on Tuesday evening. In an end of year news conference,
the UK Prime Minister also said the country is in a stronger position to deal
with economic risks than a year ago and he wants to see more bank lending to
businesses. Check back at 10 o'clock Eastern for a report on pressure being put
on British banks to reel in bonuses. Also, stay tuned for our live stream of the
FCC's vote on net neutrality starting at 10:30 Eastern. I'm Dan Burns. This is
Reuters Insider