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Adobe Systems Q1 Earnings Expectations Are Cloud High

Digital media software firm Adobe Systems ( ADBE ) is expected to keep the good times rolling when it reports fiscal first-quarter earnings after the market close Thursday. Analysts polled by Thomson Reuters predict that Adobe will post earnings per share of 61 cents excluding items on sales of $1.34 billion. It would translate to year-over-year growth of 39% in EPS and 21% in sales. For fiscal Q2, analysts are modeling earnings of 65 cents a share minus items, up 35%, on sales of $1.39 billion, up 20%. Like Microsoft ( MSFT ), Adobe has earned the favor of investors through its transition from desktop software to Internet cloud computing services. Adobe has three cloud computing businesses: Creative Cloud, Marketing Cloud and Document Cloud. The biggest is Creative Cloud, which includes well-known products for creative professionals such as Photoshop, Illustrator and InDesign. Marketing Cloud provides online marketing and advertising services. Document Cloud leverages Adobe’s popular online document-sharing product Acrobat and its ubiquitous PDF format. Adobe stock was down a fraction, near 86.50, in afternoon trading on the stock market today . Adobe hit an all-time high of 96.42 on Dec. 17, just days after it reported better-than-expected fiscal Q4 earnings . UBS analyst Brent Thill on Monday reiterated his buy rating on Adobe stock with a 12-month price target of 105. In a research report, Thill said that he expects Adobe’s Q1 report to be a “solid kickoff to the year.” Investors will be focused on Creative Cloud subscribers, Digital Media annual recurring revenue and operating expenditures, Thill said. “We expect few surprises, as we think the creative/marketing spend environment was generally stable and we did not detect any significant promotions,” he said. “Macro remains a potential risk for the year, but for ADBE to get hit, we would have to see a prolonged recession, including sharp cuts to advertising & marketing budgets leading to layoffs in related staff, which we do not see as a high probability at this time.” Adobe will be better shielded from recessions than some other companies, since most of its revenue now is on a subscription basis, he said. Adobe exited fiscal Q4 with 74% recurring revenue. “ADBE remains a top large-cap growth story, with double-digit revenue growth, expanding 30%+ margins and clear leadership in its core markets,” Thill said. Rosenblatt Securities analyst Kirk Adams on Friday maintained his buy rating on Adobe stock, with a price target of 112. “We believe that their core businesses of Creative and Marketing Cloud will show strong growth in both revenues and earnings,” Adams said. “More importantly, we believe their outlook will remain strong.”

Amazon.com, GrubHub Under Fire From Uber Restaurant Delivery

Ride-booking firm Uber announced in a blog post Tuesday that it was expanding its restaurant delivery service and spinning it off from the main Uber mobile app. Called UberEats, the food delivery app will add competitive pressure to Amazon.com ( AMZN ) and GrubHub ( GRUB ), both of which have competing restaurant delivery offerings. GrubHub stock was down 5% in early afternoon trading in the stock market today , while Amazon stock was flat. UberEats is an expansion of the company’s “instant delivery” service, which offers a fixed menu and deliveries in “as little as 10 minutes.” UberEats is partnering with “hundreds” of restaurants to make food delivery available seven days a week, according to the company’s blog. Cowen analyst Kevin Kopelman conducted tests of UberEats in Santa Monica, Calif., and found that the app’s estimates — 30 minutes or less, with a midpoint around 11 minutes — beat Amazon Prime Now Restaurants’ nationwide average of 39 minutes. GrubHub does not provide precise timing information because it doesn’t make the delivery itself, Kopelman pointed out in a research note Monday. Amazon offers estimates “within the hour.” Kopelman says that UberEats has changed to curbside delivery only, which means that drivers will not meet customers at the door, as is the norm in food delivery. Kopelman says that changing to curbside lets the company more easily integrate existing drivers for UberX — its taxi-like service, where drivers use personal cars to ferry passengers — which the firm is using as a primary source for delivery recruitment. An Uber spokeswoman told IBD that the company’s “instant delivery” is curbside, but she added that its regular restaurant delivery “in most cases” is door-to-door. Unlike Amazon and GrubHub, UberEats does not allow tipping within the app — though customers can give the driver a cash tip — and its fees are among the lowest among its competitors, according to Kopelman. Amazon does not charge a delivery fee, at least for now. “Our initial impressions of UberEats in Los Angeles make us incrementally more cautious on the competitive environment for GrubHub,” Kopelman wrote. The UberEats app and curbside restaurant delivery are set to roll out in Chicago, Houston, Los Angeles, San Francisco and Toronto, according to the company’s blog. Seven other major markets are set to open “around the corner” — including Melbourne, New York and Paris. Troubled Market But if startups are any indication, then UberEats, Amazon and GrubHub are vying for a market that is looking at a troubled future. Tuesday, TechCrunch reported that SpoonRocket, a food delivery app, is shutting down amid the “on-demand apocalypse,” referring to the big challenges of the food deliveries business. And Monday, the Wall Street Journal published a report  saying that grocery delivery app Instacart, valued at over $2 billion, is slashing its driver pay 63% in a bid for profitability. The WSJ also pointed out that such on-demand delivery companies are attempting to avoid repeating history. In the dot-com bust, heralded grocery delivery startup Webvan Group burned through $800 million before shutting down in 2001.

Lilly Changes Endpoint For Alzheimer’s Drug Trial; Stock Falls

Big pharma Eli Lilly ( LLY ) changed its goals for a much-anticipated clinical trial of its Alzheimer’s disease drug Tuesday, sending the stock down in a bad day overall for drug stocks. Lilly’s phase-three trial of its drug solanezumab, called Expedition-3, had previously targeted two primary endpoints: a slowing of cognitive decline, and a slowing of functional decline. On Tuesday, Lilly said it was going to keep cognitive decline as the primary endpoint, but functional decline would become a key secondary endpoint. Lilly is expecting to report its first results from the trial late this year, and make a decision about filing for approval based on the outcome. “Emerging scientific evidence supports the idea that cognitive decline precedes and predicts functional decline in Alzheimer’s disease, particularly in earlier stages of the disease,” Lilly said by way of explanation in its press release. Lilly added that “regulators globally will continue to view both cognitive and functional endpoints as necessary for clinical trials in people with mild Alzheimer’s dementia, and regulatory guidance has been to include these as co-primary endpoints,” so it’s not clear how much difference this will make to the drug’s approvability. Nonetheless, a trial that failed a co-primary endpoint would still be a failed trial. “Sounds like Lilly is doing everything they can to improve the success rate of Expedition-3,” wrote Evercore ISI analyst Mark Schoenebaum in an email to clients. Schoenebaum said Lilly told him the decision wasn’t based on data from the trial itself, which the company hasn’t yet seen. Lilly did analyze data from its earlier solanezumab studies Expedition-1 and Expedition-2, however, “and other datasets in the field.” Schoenebaum added that the phase-three trial of a possible competitor from Biogen ( BIIB ), aducanumab, is using a different test that measures both cognitive and functional decline as its sole primary endpoint. Lilly stock hit a 52-week low of 69.60 on the stock market today , on a day when stocks in general and drug stocks in particular were taking a hit. By midday,  it was down 3.5% near 71. Biogen stock was down 2.5% near 250.