Shares of Adobe (NASDAQ:ADBE) are trading lower after the company reported its quarterly earnings. For the quarter ended March 4, the company reported revenue of $4.26 billion, up 9% year-over-year and beating analyst expectations of $4.23 billion. In addition, earnings per share (EPS) came in above analyst expectations of $3.35, tallying in at $3.37. With beats in both revenue and EPS, why exactly is ADBE stock trading lower today?
ADBE Stock: Adobe Reports Quarterly Earnings
Adobe’s guidance for the second fiscal quarter likely explains the stock’s poor performance today. The software company gave guidance of $4.34 billion in revenue and an EPS of $3.30. Both of these figures were below consensus analyst estimates of $4.4 billion in revenue and EPS of $3.35.
Furthermore, Adobe disclosed that following Russia’s invasion of Ukraine its annual recurring revenue (ARR) for fiscal year 2022 would be reduced by an estimated $75 million. That number reflects “all ARR for existing businesses in Russia and Belarus.” Indeed, on March 4, the company announced that it would be discontinuing operations in Russia and Belarus. While Adobe will stay active in Ukraine, the company reduced its ARR by $12 million to reflect political uncertainty. In total, the company expects a $87 million reduction in ARR.
Additionally, Adobe disclosed that it repurchased 3.8 million shares during the quarter. CFO Dan Durn added that:
“Adobe’s Q1 results reflect the company’s strong execution and resilience through unprecedented circumstances. Our momentum, product innovation and immense market opportunity position us for success in 2022 and beyond.”
With the earnings report in mind, let’s pivot over to see how Wall Street feels about the software company.
3 Wall Street Analysts Weigh In on Adobe
- Morgan Stanley has a price target of $591. Analyst Keith Weiss lowered his price target from $652 after reviewing Adobe’s earnings. Weiss noted that the Russia-Ukraine war, a potential reduction in European spending and weak guidance are all causes for concern. In order for Adobe to get its “groove back,” the analyst would like to see increased digital media ARR, acceleration in digital experience and improved operating margins.
- Jefferies has a price target of $570. Analyst Brent Thill lowered his price target from $550 after reviewing the company’s quarterly results. Thill believes that Adobe’s weak guidance is attributed to the Russia-Ukraine war and “additional small macro headwinds.” However, the analyst states that a price increase during fiscal Q2 should help to offset these losses. Thill remains bullish on ADBE stock for the long term.
- Oppenheimer has a price target of $560. Analyst Brian Schwartz lowered his price target from $660 after reviewing the quarterly earnings. Schwartz notes that the first quarter was the second consecutive quarter in which Adobe has issued shaky guidance, despite an outperformance in digital media ARR. As a result, this “raises questions around the momentum of the business.” However, the analyst reiterated his “outperform” rating and believes the quarter showed “healthy demand.”
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
