Adobe Analyst Frets Over Shaky Fundamentals Ahead Of Q4 Results: Retail Optimistic

Citi analysts said Adobe’s core business faces continued revenue leakage, exacerbated by inclement macroeconomic conditions and competitive threats.

San Jose, California-based Adobe Inc. ($ADBE), a provider of document processing software, services and tools, is scheduled to report its fiscal year 2024 fourth-quarter results after the market closes on Wednesday.

On average, analysts expect the company to report non-GAAP earnings per share (EPS) of $4.67 versus $4.27 a year ago and guidance of $4.63 to $4.68. 

Revenue is expected to rise 9.7% year-over-year (YoY) to $5.54 billion. The guidance issued in mid-September calls for revenue of $5.50 billion to $5.55 billion. 

Third-quarter revenue was $5.41 billion, with $4 billion coming from the digital media segment and $1.35 billion from the digital experience segment. Net new digital media annualized recurring revenue (ARR) was $504 million and the company exited the quarter with Digital Media ARR of $16.76 billion. 

Adobe's remaining performance obligations (RPO) at the end of the third quarter was $18.14 billion. 

Citi analysts reduced the price target for Adobe stock from $616 to $590 on Monday and maintained a ‘Neutral’ rating, TheFly reported. The analysts said the core business faces continued revenue leakage, exacerbated by inclement macroeconomic conditions and competitive threats. 

However, with a lower bar for fiscal 2025 ARR, the guidance could be in line, they said.

Adobe’s management will host an earnings call at 5 p.m. ET. 

Sentiment toward Adobe stock improved from 'neutral' a day ago to 'bullish' (55/100), with message volume perking up to ‘high.’

A Stocktwits user sees existential risk for Adobe. “Everything Adobe makes will get replaced by AI code tools within 12 months,” they said.

A bullish user, however, suggested the stock is undervalued at current levels.

In premarket trading, as of 9:03 a.m. ET, Adobe shares rose 0.25% to $548.40. For the year, the stock is down 8.31%, grossly underperforming the Invesco QQQ Trust ETF ($QQQ), which is up about 28% for the same period.

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