Adobe Earnings Breakdown: Adobe Surpasses Estimates but Faces Challenges
2024.12.13 04:47
Adobe (NASDAQ:) reported adjusted EPS of $4.81 in Q3, exceeding market estimates of $4.67. The company has beaten street estimates in each of the last 8 quarters.
Results came in 3% higher than expectations, which is about in line with the 8-quarter average (orange line).
Earnings grew 13% over last year, which is below the 8-quarter average of 16% (orange line). Earnings growth has slowed for the 5th straight quarter now.
Sales came in at $5.61 billion, which exceeded expectations of $5.54 billion. Adobe has also beaten street estimates for sales over the last 8 quarters.
Sales came in 1.2% above street estimates, which happens to be the biggest beat in the last 8 quarters and well above the recent average of 0.7%.
Sales grew 11% over last year, same as last quarter and right in line with the 8-quarter average.
Forward guidance was a bit shy of market expectations. The market is currently pricing in about 11% EPS growth over the next 4 quarters, on a forward price-to-earnings (PE) ratio of 23.8 based on this morning’s opening price. The stock is still trading below its 2021 high of $699, but well off its bear market low. The stock pulled back to its 50% retracement level earlier this year and appears to be inside what looks like a “triangle” chart pattern. It’s testing the lower end of the triangle on today’s 10% gap down. A breakdown could retest May’s lows, but as long as those lows hold I’ll give this current rally the benefit of the doubt.
The stock is negative YTD in a year when the is up 25%+. I don’t like that. If you’re a shorter-term momentum trader, there are much better options. On an investing time frame, I’m not really that excited about it either. It’s a pretty solid, stable company that is trading at a discount to the “mag 7” type tech stocks. But its another one with average growth that’s currently trading at above-average valuations. EPS growth is slowing, and sales growth seems to have plateaued in the 10-12% range. Which isn’t bad. The EPS & sales beats were impressive but offset by the disappointing sales guidance.
