After This Latest Pullback, Adobe Stock Is a Solid Buy Ahead of Earnings

The last time I spoke about Adobe (NASDAQ:ADBE), I said, “ADBE stock is still a buy opportunity that could fetch up to $450 a share by the close of 2020.”

Adobe (ADBE) logo on wall of corporate building.
Source: r.classen / Shutterstock.com

That was on Feb. 25, as Adobe traded around $356 a share.

Nowadays, the ADBE stock is up to $475, where it’s again a solid “blood in the street” opportunity. After pulling back in recent days on tech weakness, the ADBE stock caught support at its 50-day moving average, where it’s now oversold.

From here, I’d like to see the ADBE stock revisit its recent high of $536.88.

A Closer Look at ADBE Stock

Over the last few weeks, shares of Adobe have rocketed on strong earnings results from other cloud software companies like Salesforce (NYSE:CRM).

“Salesforce’s total second quarter revenue was $5.15 billion, an increase of 29% year-over-year. Subscription and support revenues for the quarter came in at $4.84 billion, an increase of 29% year-over-year. Professional services and other revenues for the quarter were $0.31 billion, an increase of 23% year-over-year,” according to the company.

As we near Adobe’s earnings report on Sept. 15, there’s hope of solid earnings just like that.

In its most recent report in June, Adobe reported quarterly revenue of $3.13 billion, or 14% year over year growth. Its digital media segment revenue was $2.23 billion, representing 18% year over year growth. Document Cloud revenue was up to $360 million.

“Adobe delivered another quarter of record revenue and expanding profitability despite the challenging environment, demonstrating the resiliency of our business model,” said John Murphy, executive vice president and CFO, Adobe. “We drove record Digital Media net new ARR for Q2, highlighting how mission-critical creative and document solutions are in engaging remotely.”

Adobe Is in a Strong Financial Position

Even with the pandemic, Adobe continues to thrive because it has the products many of us need right now. All as we work, play, and school from home.

In fact, with millions working from home, Adobe’s software proves critical for online work, paperless workflow, in addition to e-commerce. That includes the Adobe Document Cloud segment, which is growing rapidly as businesses begin to move toward digital documents instead of paper.

There’s also the Adobe Experience Cloud, which provides cloud services to digital businesses. There’s also the Creative Cloud Business, for example. Collectively, all three are seeing sizable growth, which creates more growth and larger margins for Adobe.

“With consistent revenue growth in the last 21 quarters, the company is likely to see an increased demand for its services — as long as remote work remains the norm. Therefore, Adobe’s strong growth potential makes this stock a worthy investment,” as noted by Investorplace contributor Divya Premkumar.

Better, a good deal of analysts still love the ADBE stock. Jefferies’ Brent Thill, for example, comparing the company’s management to “highly experienced pilots.”

The Bottom Line on Adobe Stock

As I noted above, nowadays, the ADBE stock is up to $475, where it’s again a solid “blood in the street” opportunity. After pulling back in recent days on tech weakness, the ADBE stock caught support at its 50-day moving average, where it’s now oversold.

From here, given I’d like to see the ADBE stock revisit its recent high of $536.88. All given high demand for its products, and on potentially strong earnings, as we’ve seen from competitors. Plus, with the virus showing no signs of abating, Adobe earnings could continue to rocket higher, as millions work, play, and school from home.

On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Ian Cooper, an InvestorPlace.com contributor, has been analyzing stocks and options for web-based advisories since 1999. As of this writing, Ian Cooper did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2020/09/adbe-stock-solid-buy-ahead-of-earnings/.

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