Adobe’s stock plunged over 9% on Friday following its release of underwhelming fourth-quarter guidance, despite reporting third-quarter earnings that exceeded expectations. The tech giant announced $5.41 billion in revenue for Q3, marking an 11% year-over-year increase and surpassing analysts’ estimates of $5.37 billion, according to LSEG. Net income for the period rose to $1.68 billion, or $3.76 per diluted share, from $1.40 billion, or $3.05 per share, the previous year.
For Q4, Adobe forecasts revenues between $5.50 billion and $5.55 billion and earnings per share ranging from $4.63 to $4.68. These projections fell short of analysts’ expectations of $5.61 billion in sales and $4.67 earnings per share.
Goldman Sachs maintained their buy rating and a $640 price target on Adobe, attributing the stock’s decline to the disappointing guidance overshadowing strong core business performance, driven by AI adoption. “While investors might be concerned about the guidance affecting FY25 expectations, we believe the reaction is exaggerated,” Goldman Sachs analysts noted.
Bank of America echoed a similar sentiment, describing Adobe’s results as mixed but overall healthy. They highlighted Adobe’s significant contributions to AI generation, comparable only to Microsoft at this scale. “No change to our positive view on Adobe,” they stated, suggesting that while the Q4 digital media outlook could have been better, their FY26 estimates remain optimistic due to balanced strengths in creative and document cloud sectors.
UBS analysts critiqued Adobe’s Q4 outlook as “uninspiring” but also deemed the resultant market selloff as excessive. “In our view, the print was hardly a disaster,” they commented.
Overall, Adobe’s solid Q3 performance was overshadowed by cautious Q4 guidance, prompting an investor selloff despite the company’s continued robust engagement with AI and cloud services.
— Reported by Michael Bloom and Kif Leswing, CNBC.
Original Story https://www.cnbc.com/2024/09/13/adobe-shares-fall-9percent-on-weak-fourth-quarter-guidance-.html
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