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Is Adobe’s (ADBE) stock a buy ahead of next week’s earnings?

Over the years, Adobe Inc. (NASDAQ: ADBE) has played a key role in transforming the way businesses and individuals use media, through its mission-critical products for graphic design and document management. The tech firm is counting on the stable demand for its offerings and continued business innovation to tap into new opportunities this year and beyond.  

The San Jose-headquartered design software maker ended 2022 with record high revenues and cash flow, which is a testament to its resilience to challenges like the pandemic-induced disruption and the ongoing economic slowdown. Having entered the new fiscal year on a high note, the company looks poised to continue executing well on its strategies across Creative Cloud, Document Cloud, and Experience Cloud.

The Stock

As the software firm prepares for earnings announcement, the stock is recovering steadily from the recent fall but it continues to trade below the long-term average. It looks set to regain the lost momentum this year, creating good shareholder value. Considering the general optimism surrounding the company’s long-term finances, the current valuation offers an entry point to those looking to invest in Adobe.  


Check this space to read management/analysts’ comments on quarterly reports


On March 15, after markets close, Adobe will be publishing its financial results for the first quarter of fiscal 2023. Analysts’ consensus estimate is for a 9% increase in adjusted profit to $3.68 per share. The bottom line is estimated to have benefited from an 8.5% increase in revenues to $4.62 billion.

From Adobe’s Q4 2022 earnings conference call:

“We have everything it takes to continue our success in the future: massive market opportunities; a proven ability to create and expand categories that transform markets; an expansive product portfolio that serves a growing universe of customers; revolutionary technology platforms that advance our industry leadership and competitive advantage; an expanding ecosystem that delivers even greater value to customers; strong business fundamentals; and the most dedicated and talented employees. I have never been more certain that Adobe’s best days are ahead.”

Financials

In the past five years, Adobe’s profit beat the consensus estimates in almost every quarter, and it was no different in the December quarter. Fourth-quarter profit, excluding special items, rose an impressive 13% to $3.60 per share. Continued strong growth in the core Digital Media segment and the Digital Experiences division pushed up total revenues to $4.53 billion.


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Sales rose in all geographical segments, reflecting the demand recovery brought about by market reopening. Buoyed by the positive momentum, the management predicts first-quarter 2023 revenue and adjusted earnings to be slightly above the levels seen in the final three months of 2022.

After maintaining an uptrend for over a week, ADBE traded lower on Friday. In the past six months, it has lost about 9%.

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