Diversified software giant Adobe Inc. (ADBE) is scheduled to report its first-quarter 2022 earnings results after U.S. markets close on March 22, 2022. The upcoming financial results follow Adobe’s record-breaking fourth-quarter and full-year 2021 revenue performance.
Investors eagerly wait to see if the company maintains its stellar momentum into 2022 and whether the upcoming financial data update will have any effect on ADBE stock’s current bullish rating.
Adobe continues to offer content creation and data solutions that a digitizing world loves and sells new technologies that democratize creativity, shape the next generation of storytelling, and inspire entirely new categories of business. I am bullish on ADBE stock.
The company has an excellent revenue growth outlook considering the global shift to all things digital. However, the business won’t be totally immune to global risks, including geopolitical tensions, rising inflation rates, and increasing interest rates that may slow down consumer spending rates.
Recap: Adobe’s Record-Breaking Fourth Quarter
Adobe had a record fourth-quarter in 2021 as a 20% year-over-year revenue growth to $4.11 billion revenue printed a new record in the company’s 36-year history since going public in 1986.
The company’s Digital Media segment reported its first $3 billion quarterly revenue, just as its Digital Experience segment posted its first-ever $1 billion quarterly sales rate.
Meanwhile, operating cash flow for the quarter of $2.05 billion was the highest ever quarterly cash hoard. Adobe has the capacity to retain half its sales as cash after paying business expenses, and investors in ADBE stock will find that an awesome business profile.
For the full year 2021, Adobe achieved a record annual revenue of $15.79 billion, representing 23% year-over-year growth.
ABDE Stock First-Quarter 2022 Earnings Preview
Adobe’s first-quarter results cover the three-month period to February 28, 2022. In its most recent earnings presentation in December, management provided revenue guidance for $4.23 billion for the first quarter of 2022. Management’s forecast implies a potential 8.3% year-over-year growth in Q1-2022 revenue.
However, Wall Street analysts seem a little more bullish on the company’s first-quarter sales performance. The average analyst revenue estimate for Adobe’s first quarter of $4.24 billion represents an 8.5% year-over-year growth from the company’s comparable quarter last year.
The company provided non-GAAP earnings per share (EPS) guidance for $3.35 per diluted share. Wall Street’s consensus non-GAAP EPS forecast for Adobe’s first quarter of $3.34 per diluted share implies a 6.4% earnings growth over last year’s comparable quarter.
Adobe has an excellent record of beating analysts’ consensus earnings forecasts. Besides the most recent earnings report, where EPS was in line with expectations, the company has beaten analyst forecasts since February 2019.
Could Adobe Beat Analyst Estimates Again?
Beating Wall Street estimates may be an easy job for Adobe this time around as analysts’ consensus earnings forecasts for the quarter are already below management’s guidance. Could well-resourced analysts be more precise than management?
Well, for all we know, management provided its guidance three months ago, on December 16, 2021. Analysts have the liberty to adjust their forecasts for new information any day.
Therefore, Wall Street’s forecasts are more current than management’s guidance.
ADBE stock could revalue higher if the company beats market expectations again on Tuesday. That said, investors will place more weight on management’s commentary and its updated guidance for the second quarter and full-year 2022.
Wall Street’s Take on ADBE Stock
Wall Street analysts assign a consensus Strong Buy rating on Adobe stock, with 12 Buys and two Hold ratings assigned in the past three months. At the time of writing, the average Adobe stock price target of $586.93 represents 30.4% upside potential over the next 12 months.
Investor Takeaway
Adobe has been a consistent growth machine with strong earnings growth and massive cash-flow-generating power. ADBE stock has room to recover to all-time highs if its business segments remain as strong as they were in 2021. The company’s first-quarter 2022 results could impress the market on Tuesday.
However, a generally weak market sentiment during turbulent times of an ongoing European conflict in Ukraine, slowing global economic growth due to sanctions-induced shocks, rising global inflation and interest rates, with central banks adopting contractionary monetary policies, could dampen the stock market’s propensity to rally this year.
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