Here Is Why Adobe Inc. (ADBE) Earnings Are So Important

After opening Monday at around $229.19, Adobe Inc. (NASDAQ:ADBE) stock surged to as high as $233.3. It then made a downturn, dipping as low as $227.91. Although the stock bounced a bit into the close, it finished the day at $231.96, up 6.4 points or 2.84 percent on the day. The final volume for the day was 3.564 million, which was less than its average volume. The firm is left with a market cap of $113 billion and now has 489.04 million shares outstanding. Adobe Inc. (ADBE) stock has lost -8.29 percent of market value in 21 trading days.

ADBE stock has a trailing 3-year beta of 1.19, offering the possibility of a higher rate of return, but also posing more risk. The portion of a company’s profit allocated to each outstanding share of common stock was $5.3 a share in the trailing twelve months. The stock’s value has surged 32.37 percent year to date (YTD) against a rise of 25.75 percent in 12 month’s time. The company’s shares still trade -16.44 percent away from its 1-year high of $277.61 and 40 percent up from 52-week low of $165.68. The average consensus rating on the company is 2, on a scale where 5 equates to a unanimous sell rating. In short, the mean analyst recommendations are calling this stock a buy.

Adobe Inc. (ADBE) will probably climb 25.56 percent over the next 12 months, according to price target estimates compiled by finviz. Meanwhile, they have set a $325 as 1-year high price target. This represents a whopping 40.11 percent increase from where shares are trading today. The 12-month median price target assigned by the analysts stands at $296, which represents a return potential of 27.61 percent when compared to the closing price of the stock of $231.96 on Monday, November 26. The lowest price target for the stock is $250 — slightly more than 7.78 percent from ADBE’s current share price.

History has shown that shares in Adobe Inc. have gone up on 20 different earnings reaction days and are predicted to add 0.04 percent when the company reports upcoming earnings. Investors will get their next glimpse of ADBE’s Q4 earnings on December 13. Analysts are forecasting revenue to climb 21 percent to $2.43B in the fiscal fourth quarter, while earnings are seen soaring by nearly 50 percent to $1.89 per share. It earned $1.73 per share, better than the $1.69, adjusted, expected by Thomson Reuters consensus estimate. Revenue was $2.29B, better than the $2.25B analysts expected. Earnings are estimated to increase by 45.9 percent this year, 17.04 percent next year and continue to increase by 32.6 percent annually for the next 5 years.

Let’s take a look at some insider activity at Adobe Inc. (NASDAQ:ADBE) and see the pattern. The earliest insider trade took place on 11/21/2018. Lewnes Ann parted with a total of 2.96 thousand shares of company at average share price of $225.38. The total for the sales was set at $666 thousand. After this transaction, the EVP, Chief Marketing Officer account balance stood at 52.69 thousand shares. The stock grew 2.92 percent since that insider sale. On 11/01/2018, Rencher Bradley, EVP & GM, Experience Cloud, sold 12 thousand shares at a price per share of $245.3. This removed 2.94 million shares from the insider’s fortune and the stock saw a -5.44 percent retreat in value since the news became public. This transaction left 68.07 thousand shares in the EVP & GM, Experience Cloud account.

On 10/17/2018, EVP, Chief Marketing Officer Lewnes Ann performed a sale transaction worth $760.12 thousand. This sale at $261.21 each has eliminated 2.91 thousand shares from the insider’s portfolio position. Meanwhile, shares have recorded -11.2 percent decrease since the transaction was reported. The insider now is left with 55.65 thousand shares remaining in the account. Ricks David A, who performs the Director job, bought 0.08 thousand shares for $19.61 thousand. The acquisition occurred on 09/24/2018 was priced at $261.43 per share. The share price plunged -11.27 percent since the reporting date. Ricks David A now left with a stake of 1.25 thousand ADBE stock worth $290.41 thousand after the insider buying.

The stock is currently hovering around the first support level of $228.81. Below this, the next support is placed in the zone of $225.67. Till the time, the ADBE stock trades above this level, bulls have nothing to fear. On momentum oscillators front, ‘RSI’ has touched 43.82 on daily chart, which may remain a cause for concern. If the price breaks below $225.67 level on closing basis, then we may see more profit booking and the stock may show further weakness. On the flipside, hitting the $234.2 mark may result into a pull-back move towards $236.45 level.

Shares of Adobe Inc. (ADBE) are trading at a P/E ratio of 47.54 times earnings reported for the past 12 months. The industry ADBE operates in has an average P/E of 34.63. Its P/E ratio went as low as 20.89X and as high as 139.59 over the 5-year span.Further, it is sporting a 13.23 on the Price-to-Sales ratio. Compare this with the industry average P/S of 5.56. 87.1 percent is the gross profit margin for Adobe Inc. and operating margin sits at 32.3 percent. Along with this, the net profit margin is 28.2 percent.