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Brand Face-Off: Adobe Systems Incorporated vs. Autodesk, Inc.

Evaluating ADBE and ADSK from technical and sentiment viewpoints

by 5/28/2014 2:58:45 PM
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Software providers Adobe Systems Incorporated (NASDAQ:ADBE) and Autodesk, Inc. (NASDAQ:ADSK) are not only similar companies by nature, but their shares have put forth comparative performances on the charts over the past year, tacking on roughly 52% and 39%, respectively, during this time period. What's more, both ADBE and ADSK hit some turbulence after reaching technical milestones in late February, but have been in recovery mode for the past month or so. To be more specific, ADBE fell 19.6% from its Feb. 28 all-time high of $71.11 to its May 7 year-to-date low of $57.15, before rebounding 13.7% to its current perch at $64.96. Likewise, ADSK plunged 23.7% from its Feb. 27 record peak of $58.68 to an April 11 year-to-date low of $44.76, but has since regained 15.5% of its value to trade at $51.72.

Daily Chart of ADBE since May 2013

Daily Chart of ADSK since May 2013

On Wall Street, both stocks' efforts to reclaim record-high territory haven't gone unnoticed. From its 17 covering analysts, Adobe has received 12 "buy" or better endorsements, versus five "hold" suggestions. Furthermore, the average 12-month price target of $72.81 stands at a level yet to be explored by ADBE. Meanwhile, Autodesk boasts eight "strong buy" recommendations, five "holds" and not a single "sell" rating. Plus, the consensus 12-month price target of $58.29 represents expected upside of 12.7% from ADSK shares' current price.

Among the options crowd, however, speculators seem to have taken different outlooks on Adobe, versus Autodesk. In fact, the former's Schaeffer's put/call open interest ratio (SOIR) comes in at 0.64, with calls outnumbering puts by a more than 3-to-2 margin among options expiring within the next three months. What's more, this ratio ranks in the bottom 7% of its 12-month range, indicating short-term speculators have rarely been more call-heavy toward ADBE than they are now.

Meanwhile, ADSK's current SOIR of 0.71 is up 36.5% from its May 19 reading of 0.51, and stands higher than 78% of similar readings from the past year. In other words, short-term put open interest (compared to call open interest) is heavier than usual.

With that being said, an extension of Autodesk, Inc.'s (NASDAQ:ADSK) upward trajectory may cause some option bears to hit the exits in the near term, which could give the stock an extra boost up the charts. Therefore -- from a contrarian perspective -- ADSK may be on its way back into record-high territory before Adobe Systems Incorporated (NASDAQ:ADBE), and so the former has been declared the winner -- by a hair -- in this week's Brand Face-Off.

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