“Sitting at halftime” is not exactly the best place to be, for a sports team, or for a stock. Nothing is advancing. And potentially worse, the other team—or even teams—are preparing to take over your position. That is where software giant Adobe (ADBE) is right now, according to RBC analyst Matthew Swanson. And investors were hardly cheering either, as shares plummeted nearly 13% in Thursday morning’s trading.
Swanson came out hard, noting that this was going to be a “two-event sort of quarter,” in an interview with Yahoo Finance. First, we would get earnings, and from there, we would proceed directly into the Adobe Summit about a week later. So right now, everyone is reacting to the earnings report, which did not fare so well. But in just a few days, we will be getting the future of Adobe at its big event.
That kind of puts us in an odd position right now; everyone is reacting to the big news, but does not seem to be taking into account the likely news that will emerge directly from the Adobe Summit event. Granted, people cannot plan their portfolios around theoretical news, but still. And Swanson, for his part, found it odd that the reaction was so strong. Much of what Adobe released was in line with—or at least close to, he noted—expectations.
Looks Like We’re In For Stormy Weather
However, there was a bigger problem; the recent Adobe earnings report came out with a projection of future earnings as well. Second-quarter revenue is supposed to be right around what LSEG analysts were projecting, between $5.77 billion and $5.82 billion.
But one key factor that seemed missing was when Adobe will be able to actually monetize its generative AI operations. Adobe has been working hard to add more AI editing tools to its lineup, and that should be a key distinction and a market advantage. But seeing when that advantage actually turns into cash is looking a bit difficult, and Adobe will need to show off a decent timeline in short order to win back investors.
Is Adobe a Good Stock to Buy Right Now?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on ADBE stock based on 12 Buys, seven Holds and one Sell assigned in the past three months, as indicated by the graphic below. After a 32.91% loss in its share price over the past year, the average ADBE price target of $547.11 per share implies 42.83% upside potential.
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