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Adobe Inc. (ADBE) has experienced a great deal of volatility year-to-date. Over the past 2-years, Adobe has underperformed the S&P 500, with the stock rising by approximately 41.1% compared to the S&P’s overall gain of about 83.5%. Hedge funds were selling, though the stock managed to climb the WhaleWisdom Heatmap during the fourth quarter, to a rank of eleven from seventeen.

Adobe is a multinational computer software company specializing in digital marketing and digital media solutions. It operates through a segmented business model that includes Digital Media, Digital Marketing, and Print and Publishing. Adobe’s products and services are geared towards consumers, professionals, enterprises, marketers, and application developers across multiple operating systems, devices, and media. The company is well known for software and programs such as Acrobat Reader, the Portable Document Format (PDF), Adobe Flash web software ecosystem, Photoshop image editing software, and Adobe Creative Cloud.

February and March were not easy months for investors, with volatility in the market due to uncertain times throughout the world; Russia’s war in Ukraine, rising gas and oil prices, inflation, and impending interest rate hikes all impact the United States (US) economy. Like other software and technology companies, Adobe has been complying with government sanctions imposed by the US, European Union, and the United Kingdom by terminating access to many of its products and services to Russia and halting all new sales of Adobe products and services in Russia. While seen as a temporary action, these various changes will negatively impact Adobe’s potential revenue stream for 2022.

Hedge Funds Are Selling

Adobe received mixed responses from Hedge Funds and Institutions in the fourth quarter. While Hedge Funds were selling, some Institutions added the stock to their portfolios, and the aggregate 13F shares held by institutions increased to approximately 389.0 million from 388.1 million, a change of about 0.2%. In contrast, Hedge Funds decreased their holdings by about 6.3% to 90.4 million from 96.5 million. Overall, 37 created new positions, 153 added to an existing holding, 46 exited, and 152 reduced their stakes. While Adobe’s stock price recently saw a dip, long-term 13F metrics between 2002 and 2022 suggest that Adobe has long-term investment potential.


Encouraging Earnings Estimates

Analysts expect earnings to grow over the next two years, rising to $13.66 by November 2022 and $16.13 by November 2023. Year-over-year estimated increases could bring revenue to $20.5 billion by late 2023, up from the anticipated $17.9 billion for 2022.


Analysts Lower Price Targets

Adobe’s shares plunged after second-quarter guidance was shared, with earnings falling below market expectations. Analyst Keith Weiss of Morgan Stanley lowered his price target to $591 from $652, giving Adobe an outperform rating. Weiss had noted the promise of a second-quarter price increase and the need to move past concerns about a weak spending environment in Europe. Weiss is looking to see more steady performance from Adobe.

Bank of America analyst Brad Sills kept a buy rating on the software giant but lowered his firm’s price target on the stock to $560 from $640. Lower first-quarter revenue was due to the war-related slowdown of sales in Russia and nearby areas. Sills cited a lower earnings model and concerns for Adobe’s Digital Media business segment. Deutsche Bank’s Brad Zelnick also lowered the firm’s price target on Adobe shares to $575 from $600. Zelnick maintained a buy rating on Adobe, aware of the impact of Russia’s sanctions on Adobe and influenced by Adobe’s annual recurring revenue figures coming in slightly above expectations. While many analysts lowered price targets, Brent Thill of Jefferies LLC raised his firm’s price target on Adobe to $570 from $550, maintaining a Buy rating. Jefferies appears to recognize Adobe’s long-term outlook is brighter than recent performance.

Optimistic Outlook

Analysts see investment potential in Adobe despite many lowered price targets. Adobe remains a crucial player in the computer software market. Institutions were buying, and earnings estimates through 2023 look favorable. Its recently reduced share value may be appealing to investors long-term.

This entry was posted on Monday, March 28th, 2022 at 7:40 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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