Adobe Systems Inc.’s (ADBE) stock has steadily advanced over the past five months, with the shares rising by about 50% since the start of 2020, outperforming the S&P 500’s gain of approximately 6.9%.
Adobe is a multinational computer software company offering a variety of multimedia and creativity software products, with revenue segments including digital media, digital experience, and legacy publishing products.
Adobe appears to have been minimally affected by the coronavirus pandemic, while many other companies and industries have seen a negative impact. More recently, investors have noted that Adobe is benefitting from the shift to telecommuting, as there has been a higher demand for digital products such as Document Cloud, which includes Acrobat PDF, Scan, and Sign products.
Adobe was added to the WhaleWisdom WhaleIndex 100 on August 16, 2020. However, despite Adobe’s improved performance in 2020 to date, hedge funds and institutions overall were selling the stock in the second quarter, causing Adobe to slip on the WhaleWisdom Heat Map to a ranking of 36 from a previous ranking of 18. Adobe saw its stock value increase as businesses have been driven by the pandemic to increase remote work and collaboration dramatically.
Uninspired Hedge Funds Despite Earnings
Adobe has more recently left hedge fund managers and institutions feeling lukewarm. Looking at activity by the top hedge funds in the second quarter, the aggregate holdings decreased to about 84.7 million from 90.5 million, a mild decrease of approximately 6.4%. Of the hedge funds, 51 created new positions, 123 added to an existing one, 46 exited, and 134 reduced their holdings. Institutions were also selling, lowering 13F shares to 400.7 million from 406.3 million, a decrease of about 1.4%.
Encouraging Multi-year Growth
Analysts have optimistic revenue and earnings estimates for the next several years, with expectations that earnings will rise year-over-year from 2020 through to 2023. Increases range from approximately 14.1% in 2020 to 7.3% in 2023. These significant year-over-year growth estimates would bring earnings to $12.98 per share in 2023, up from $9.73 for 2020. Additionally, revenue is forecast to climb as well, rising to $18.2 billion by the year 2023 from estimates of around $12.8 billion in 2020.
Positive Overall Outlook
Adobe’s steady growth and future estimates are encouraging for investors. While Adobe continues to face its fair share of competition from other software and digital marketing companies, the digital media leader continues to see increased pandemic related demand for its products. That should help to drive the stock higher for some time to come.