The success of Adobe’s move to a SaaS (software as a service) business model makes the company’s report a valuable leading indicator.
Adobe Stock (NASDAQ:ADBE)
Adobe Stock (NASDAQ:ADBE) fell on Monday after Mizuho, an investment firm, downgraded the cloud software provider ahead of its third-quarter results, noting that it had experienced “more difficult conditions than anticipated.”
According to analyst Gregg Moskowitz, Adobe (ADBE) has had problems despite a worse global economy, and it is conceivable that another “guide down” for the fourth quarter could occur. He downgraded his rating from buy to neutral and dropped his price target from $480 to $440. Estimates for fiscal 2023 are also thought to be excessively high.
In a message to customers, Moskowitz stated that “our enterprise checks were softer than expected, even factoring for a challenging environment.” More specifically, “big deal activity was less common, and we heard of sales cycle lengthening across significant [geographies].” In premarket trading, shares of Adobe (ADBE) decreased slightly more than 1% to $390.35.
The analyst also mentioned that a few tests “surprise” revealed a decrease in pipeline pressure. Other relationships performed better than expected, but overall, the owner of Creative Cloud appears to have had a challenging quarter.
Anticipation of Q3 results on Adobe stock
On September 15, Adobe (ADBE) is expected to release financial results for the third quarter. On $4.44 billion in revenue, analysts predict that Adobe (ADBE) will earn $3.35 per share.
Additionally, Moskowitz said that several areas of Adobe’s (ADBE) business are “sluggish,” particularly its Digital Media division and, in particular, online traffic, which appears to have decreased 13% year over year and 5% sequentially.
However, the analyst highlighted that the April 27 price increase for Creative Cloud, which may eventually be a “significant top-line driver,” will be noticed more in the third quarter than in the second.
According to the analyst, Adobe (ADBE) will be able to handle “growing demand” from clients thanks to Creative Cloud, while Document Cloud and Experience Cloud will also benefit the business. Although the San Jose, California-based company “exhibited fundamental choppiness over the past several quarters,” the worsening global economy is probably going to “add some pressure, ” and the stock is likely to be range-bound for the foreseeable future.
Investment company UBS claimed last month that DocuSign was losing market share to Adobe (ADBE).
Analysts’ opinions about Adobe are conflicting (ADBE). Seeking Alpha authors gave it an average rating of “Buy.” In contrast, ADBE is rated as a HOLD by Seeking Alpha’s quantitative approach, which consistently outperforms the market.