Adobe (NASDAQ: ADBE) stock has seen a decline of 23% year-to-date compared to the 12% increase seen in the S&P 500 index. Meanwhile, Adobe’s peer Oracle (NYSE: ORCL) has seen a 20% increase in the same period. Despite this, Adobe is expected to report its fiscal Q2 2024 results on June 13, with revenues likely to surpass street estimates while earnings are expected to meet or slightly exceed expectations. In the previous quarter, Adobe outperformed consensus estimates with total revenues increasing by 11% year-over-year to $5.18 billion, driven by gains in the digital media and digital experience divisions. The digital Media ARR also saw a rise from $13.67 billion to $15.76 billion, indicating positive momentum that is expected to continue in the upcoming results.
The performance of ADBE stock has been relatively stable amid the current financial landscape, fluctuating from $500 in early 2021 to around $460 currently. Despite this, the stock has seen significant volatility compared to the S&P 500 index. Returns for ADBE stock were 13% in 2021, -41% in 2022, and 77% in 2023, while the S&P 500 saw returns of 27%, -19%, and 24% in the same years. Beating the S&P 500 consistently has been challenging for many individual stocks in recent years, including heavyweights in the technology sector. However, the Trefis High Quality Portfolio, consisting of 30 stocks, has consistently outperformed the S&P 500 during the same period. The uncertainty in the macroeconomic environment, including high oil prices and elevated interest rates, raises questions about ADBE’s performance in the future.
Analysts forecast that Adobe’s valuation is at $607 per share, 32% above the current market price of $460. The company’s revenues are expected to continue their growth trajectory, with a 1% increase expected in Q2 FY 2024 compared to consensus estimates. Similarly, Adobe’s earnings per share (EPS) are projected to match or slightly exceed consensus estimates for the same period. The company’s net income witnessed a drop in the first quarter of 2024 due to an acquisition termination fee, but is expected to rebound in Q2. Overall, Adobe’s annual GAAP EPS is estimated to be around $12.37 in fiscal year 2024.
The stock price estimate for Adobe is significantly higher than the current market price, based on an EPS estimate of $12.37 and a P/E multiple of just over 49x in fiscal 2024. This translates to a price of $607, indicating a potential upside of 32%. The forecast for Adobe’s revenues in FY 2024 is expected to reach $21.49 billion, building on the growth momentum seen in previous quarters. The company’s strong performance in the digital media and digital experience segments is likely to drive positive results in the upcoming earnings report. Investors will be closely watching Adobe’s Q2 FY 2024 results to assess the company’s continued growth and its ability to outperform market expectations in the coming quarters.
