Adobe Systems (ADBE) Dips More Than Broader Markets: What You Should Know

Zacks Equity Research
·3-min read

In the latest trading session, Adobe Systems (ADBE) closed at $507.29, marking a -0.99% move from the previous day. This change lagged the S&P 500's 0.92% loss on the day.

Coming into today, shares of the software maker had gained 11.74% in the past month. In that same time, the Computer and Technology sector gained 9.54%, while the S&P 500 gained 6.83%.

ADBE will be looking to display strength as it nears its next earnings release. The company is expected to report EPS of $2.81, up 14.69% from the prior-year quarter. Our most recent consensus estimate is calling for quarterly revenue of $3.73 billion, up 19.31% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $11.88 per share and revenue of $15.43 billion. These totals would mark changes of +17.62% and +19.93%, respectively, from last year.

Investors should also note any recent changes to analyst estimates for ADBE. Recent revisions tend to reflect the latest near-term business trends. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Based on our research, we believe these estimate revisions are directly related to near-team stock moves. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

The Zacks Rank system ranges from #1 (Strong Buy) to #5 (Strong Sell). It has a remarkable, outside-audited track record of success, with #1 stocks delivering an average annual return of +25% since 1988. The Zacks Consensus EPS estimate has moved 5.9% higher within the past month. ADBE is currently a Zacks Rank #2 (Buy).

In terms of valuation, ADBE is currently trading at a Forward P/E ratio of 43.28. Its industry sports an average Forward P/E of 39.81, so we one might conclude that ADBE is trading at a premium comparatively.

It is also worth noting that ADBE currently has a PEG ratio of 2.37. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. The Computer - Software industry currently had an average PEG ratio of 2.72 as of yesterday's close.

The Computer - Software industry is part of the Computer and Technology sector. This industry currently has a Zacks Industry Rank of 94, which puts it in the top 38% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.


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