Goldman Upgrades ADBE, CRM; Downgrades LXK, RHT, VRSN

Goldman Sachs this morning made a flurry of rating changes in the tech sector, upgrading Adobe (ADBE) and Salesforce.com (CRM), while downgrading Lexmark (LXK), Red Hat (RHT) and VeriSign (VRSN). Here a rundown on the moves:

• Adobe: Software analyst Sarah Friar upped her rating to Buy from Neutral, setting a price target of $42; the stock closed Friday at $34.65. She writes that “a compelling investment case for Adobe is building,” including the coming launch of Creative Suite 5, which she says should be buoyed by a PC refresh cycle and OS upgrades from Apple and Microsoft. She also says there is a buying opportunity in the stock created by the uncertainty from the Omniture acquisition. And Friar sees margin improvement as top line accelerates beyond current guidance. She ups her November 2010 EPS estimate to $1.59, from $1.48; for 2011 she goes to $1.74, from $1.60.


• Salesforce.com: Friar raises her rating to Neutral from Sell, with a target of $61, right at Friday’s close of $61.01. Still, she notes that three factors make her more positive on the stock. One, she says transactions data suggest a solid October quarter. Two, the company seems to be hitting a mature phase for its business model. And three, the company’s Dreamforce conference next week should underscore the company’s “dominant position” in cloud computing and software as a service. But she also notes tha the stock carries a higher valuation, and faces a variety of competitive threats.


• Red Hat: Friar moves to Neutral from Buy, noting that as of Friday’s close there was just 5% upside to her $29 price target. This is basically a valuation call; she says her thesis on the stock is unchanged.


• VeriSign: Friar goes to a Sell rating, from Neutral, asserting that the stock is likely to underperform the software group from here. She says the legal overhang relating to the Coalition for Internet Transparency antitrust lawsuit over domain name registration at a minimum causes uncertainty and additional costs, and also calls into question the company’s ability to raise prices in 2012. She also notes a deterioration in the company’s SSL certificate business, and says there are margin expectations for the company that may not be able to be met. Her price target is now $22, down from $25. The stock closed Friday at $23.24.


• Lexmark: Hardware analyst David Bailey adds the stock to the Conviction Sell List, setting a price target of $20, well  below Friday’s close at $26.68. He notes that the stock is up 20% since reporting September quarter earnings, and asserts that they are now over-valued. Baily says a strong Q3 has moved the company’s multiple above HP, IBM and Dell, a level he finds “unsustainable given its weak competitive position and deteriorating installed base.”

In today’s trading:

• ADBE is up $1.12, or 3.3%, to $35.78.


• CRM is up $1.58, or 2.6%, to $62.59.


• RHT is off 60 cents, or 2.2%, to $27.01.


• VRSN is off 73 cents, or 3.1%, to $22.51.


• LXK is off 99 cents, or 3.7%, to $25.66.