Based in San Jose, California, Adobe Inc. (ADBE) is one of the world's largest software companies, operating through its Digital Media; Digital Experience; and Publishing and Advertising segments. With a market cap of $199.3 billion, the company is renowned for its flagship product Creative Cloud and generates revenue from licensing fees, with additional contributions from technical support and education services.
Companies valued at $10 billion or more are generally considered "large-cap" stocks, and Adobe fits into this category with its market cap exceeding that threshold, reflecting its substantial size, stability, and influence in the software industry. As a pioneer in desktop publishing and digital creativity, Adobe's strategic acquisitions, like Omniture and Macromedia, along with its shift to a cloud-based software-as-a-service (SaaS) model, have solidified its position in the industry.
However, the tech giant has fallen off its lofty perch, with ADBE stock down 31.1% from its 52-week high of $638.25. Shares of ADBE are down 23% over the past three months, underperforming the broader Nasdaq 100 Index's ($IUXX) 1% gain over the same time frame.
Longer term, ADBE is down 26.3% on a YTD basis, lagging behind the IUXX's 9.8% gains. Moreover, shares of Adobe have gained 1% over the past 52 weeks, compared to IUXX's 27% gains over the same time frame.
To confirm the bearish price trend, ADBE has been trading below both its 50-day and 200-day moving averages since mid-March.
Adobe has been underperforming due to several factors. The collapse of its $20 billion acquisition of Figma has hindered its efforts to bolster its creative software empire, compounded by the need to pay a hefty $1 billion acquisition termination fee. Additionally, despite Adobe surpassing Q1 earnings expectations on March 14, its shares dropped 14% as its Q2 guidance fell short of Wall Street estimates, ending its AI-fueled rally. Concerns arose from its projected $440 million net new ARR from its digital media segment, below analyst estimates and last year's $470 million.
To emphasize the stock’s underperformance, top rival Microsoft (MSFT) is still outperforming ADBE. Microsoft stock has gained 22.2% over the past 52 weeks and is up 9% on a YTD basis.
Despite its lackluster price action, analysts think ADBE can break out to new highs in the next year. The stock has a consensus rating of "Moderate Buy" from the 31 analysts covering the stock, and the mean price target of $626.31 is a premium of 40.8% to current levels.
On the date of publication, Sohini Mondal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
