Adobe Inc. (ADBE) shares, like other technology firms, have been in free fall since the beginning of 2022. The stock has lost almost 17% of its value year-to-date, and 26% over the past six months.
The company delivered its fiscal first-quarter financials yesterday, with revenues and earnings exceeding analyst projections. It did, however, issue dismal guidance, which explains the stock’s fall at Wednesday’s open.
What do its Q1 Earnings Results Indicate?
According to the fiscal first-quarter results, overall sales increased 9.1% year-over-year to $4.26 billion. However, the growth rate slowed from 20% in the prior quarter. Segment-wise, the revenue growth slowed in Digital Media as well as Digital Experience to 9% and 13% year-over-year, respectively.
Meanwhile, Non-GAAP earnings of $3.37 per share climbed only 7.3% year-over-year in fiscal Q1 versus 14% in fiscal Q4.
Despite the fact that Adobe posted decent quarterly results, investors were disappointed by the company’s lackluster outlook. The business expects net revenues of $4.34 billion and adjusted earnings of $3.30 per share in the fiscal second quarter, which were lower than consensus estimates of $4.41 billion and $3.35 per share, respectively.
The findings show that, while Adobe’s cloud and data products are in high demand, the company is facing increasing competition from its peers. Furthermore, Adobe is also not completely immune to global threats like geopolitical tensions, rising inflation, and rising interest rates, all of which might further slow consumer purchasing, impacting its sales.
Wall Street’s Take
On TipRanks, Adobe stock commands a Strong Buy consensus rating based on 12 Buys and five Holds. As for price targets, the average ADBE stock price prediction of $568.29 implies 32.35% upside potential from current levels as of 9:52am EST.
Bottom Line
Adobe shares may remain under pressure for some time as inflation fears increase and competition in the digital media business heats up. Furthermore, Adobe’s decision to stop selling new Adobe goods and services in Russia and Belarus may have an influence on the company’s top-line results.
However, Adobe CEO Shantanu Narayen appears to be optimistic about the company’s prospects in 2022. He writes, “Our momentum, product innovation and immense market opportunity position us for success in 2022 and beyond.”
Nonetheless, Adobe’s technological leadership, strong financials, and, most crucially, faster digital growth should all help the company gain traction.
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