Adobe Stock Down 23% YTD; Can Q2 Results Reverse The Trend?
Adobe (NASDAQ: ADBE) stock has experienced a 23% decline year-to-date, in stark contrast to the 12% increase in the S&P 500 index. Meanwhile, Adobe’s competitor, Oracle (NYSE: ORCL), has seen a 20% rise during the same period. The upcoming fiscal Q2 2024 results for Adobe are eagerly anticipated, set to be revealed on Thursday, June 13. Analysts predict that Adobe will surpass street estimates for revenues, while earnings are expected to meet or slightly exceed expectations. In the previous quarter, Adobe outperformed expectations with a remarkable 11% year-over-year revenue increase to $5.18 billion. This growth was primarily fueled by a 12% surge in the digital media sector and a 10% improvement in the digital experience divisions. Additionally, the digital Media ARR (Annualized Recurring Revenue) escalated from $13.67 billion to $15.76 billion. The projections for the second quarter suggest a continuation of this positive trend.
Despite the fluctuations in the financial landscape, Adobe’s stock price has remained relatively stable, fluctuating from around $500 in early January 2021 to approximately $460 currently. In contrast, the S&P 500 has surged by about 45% over the same three-year period. The performance of Adobe’s stock in relation to the index has been volatile, with returns of 13% in 2021, -41% in 2022, and 77% in 2023. Comparatively, the S&P 500 yielded returns of 27% in 2021, -19% in 2022, and 24% in 2023, indicating that Adobe underperformed the index in 2021 and 2022. Challenging the S&P 500 consistently has proven to be a daunting task for individual stocks in recent years, even for prominent players in the Information Technology sector like MSFT, AAPL, and AVGO, as well as megacap giants like GOOG, TSLA, and AMZN. In contrast, the Trefis High-Quality Portfolio, comprising 30 stocks, has outperformed the S&P 500 each year over the same period, showcasing better returns with lower risk compared to the benchmark index.
Given the current uncertain economic climate characterized by high oil prices and elevated interest rates, there are concerns about whether Adobe might face a situation akin to 2021 and 2022, potentially underperforming the S&P over the next year. However, there is also speculation that Adobe could experience a significant upturn. Forecasts suggest that Adobe’s valuation stands at $607 per share, indicating a 32% premium over the current market price of $460.
ADBE Earnings Estimates For FY2024Q2
- Revenues likely to surpass consensus estimates
