Take your profit on Adobe Systems, this fund manager says

Adobe Systems (Adobe Systems Stock Quote, Chart NASDAQ:ADBE) has been a winner of a stock not just this year but over the past half decade, but now might be the time to cash in some of those gains, as the stock seems to be having difficulty breaking through that $300 per share barrier.

So says Scotia Wealth’s Elliott Fishman who argues that there’s nothing wrong with taking some profits at a time like this.

Diversified software company Adobe has been a strong climber over the first half of 2019, rising from $226.24 per share on January 1 to as high as $313.11 by July 19. Those gains are in keeping with the name’s performance in recent years which have seen ADBE share increase in value by roughly 280 per cent since mid-2014.

Adobe Systems stock hitting resistance levels…

But the stock seems to have stumbled in recent weeks, a sign that the $300 ceiling might prove to be a tough resistance level, says Fishman, Director of US and International Trading at Scotia Wealth, who spoke to BNN Bloomberg on Friday.

“It has shown a little bit of character here. We’ve had some consolidating, we’ve had some selling off,” says Fishman. “$300 was a major pocket. It couldn’t go through, so we’re going to look at that as the short-term top, even on a stock that has run like this.”

“But now we’re looking at a much tighter market. If I owned it, I would start taking some off the table here,” he says. “Off that run-up and consolidating it doesn’t look ready to go any higher.”

“I would buy it at $310 but I wouldn’t buy it below $300,” he says.

Adobe’s share price got a nice lift back in June with the company’s latest earnings report, which featured $2.74 billion in revenue for its second quarter fiscal 2019 and adjusted earnings of $1.83 per share. Analysts had been expecting $1.78 per share on $2.70 billion in revenue. (All figures in US dollars.)

It was a record top line, representing a 25 per cent year-over-year growth rate and buoyed by Adobe’s Digital Media segment which at sales of $1.89 billion grew by 22 per cent from a year earlier.

“Adobe’s continued momentum is being fuelled by the explosion of creativity across the globe and the widespread business transformation agenda to deliver engaging customer experiences,” said Shantanu Narayen, president and CEO of Adobe in the quarterly press release. “With an innovative technology platform, exciting product roadmap and strong ecosystem of partners, we are well positioned for the second half of FY19 and beyond.”

At the same time, management’s guidance for the next quarter, due later this month, was softer than expected, calling for $1.95 in earnings per share on $2.80 billion in revenue, whereas analysts had been expecting $2.05 per share on a top line of $2.83 billion.

Fishman says that for those investors who have made money on the stock over the years, now might be a time to sell some — although, where to put the extra cash may be another conundrum.

“If you like this name, you can [take some off the table] and wait for it to sell off again,” Fishman says. “The problem is what do you go into, because everything pretty much looks like that right now.”

You can get out of the sector and take it off your rearview mirror or just wait, which is sort of the retail investor’s way of shorting something without shorting: sell half, wait for it to pull back and buy back in,” he says.

“Take some off the table — there’s nothing worse than watching something go straight up and straight down without doing anything,” he says.