Adobe Stock On Track To Break Below $500 After FY25 Guidance Disappoints: Retail Sentiment Nosedives

Adobe, Inc. ($ADBE) stock plunged hard in Thursday’s premarket session as traders looked past the fiscal year 2024 fourth-quarter beat and expressed apprehensions about the below-consensus forward guidance. 

San Jose, California-based Adobe reported fourth-quarter non-GAAP earnings per share (EPS) of $4.81 compared to the consensus estimate of $4.67 and the year ago’s $4.27. The bottom-line result also exceeded the guidance of $4.63-$4.68.

Revenue rose 11% year-over-year (YoY) to $5.61 billion, exceeding the $5.54 billion consensus and the $5.50 billion-$5.55 billion guidance range. Digital Media revenue climbed 12% to $4.15 billion and digital experience revenue was up 10% at $1.40 billion.

Net new digital media annualized recurring revenue (ARR) at the end of the quarter was $578 million, with digital media ARR and document cloud ARR at $17.33 billion and $3.48 billion. Creative ARR was $13.85 billion.  

Adobe exited the quarter with remaining performance obligations (RPO) of $19.96 billion, higher than the $18.14 billion at the end of the third quarter. 

Cash flows from operations were a record $2.92 billion.

Adobe  CEO Shantanu Narayen said, “Adobe delivered record FY24 revenue, demonstrating strong demand and the mission-critical role Creative Cloud, Document Cloud and Experience Cloud play in fueling the AI economy.”

Looking ahead, Adobe expects first-quarter non-GAAP EPS of $4.90-$5 and revenue of $5.63 billion-$5.68 billion. Analysts, on average, expect the numbers at $4.95 and $5.71 billion, respectively.

The company targets full-year non-GAAP EPS of $20.20-$20.50 and revenue of $23.30 billion-$23.55 billion. The consensus estimates call for non-GAAP EPS of $20.53 and revenue of $23.75 billion.

Adobe CFO Dan Durn said the company’s strategy, artificial intelligence (AI) innovation and massive cross-cloud opportunity position it well for 2025.

Barclays analysts reduced the price target for Adobe stock from $675 to $645 following the quarterly results. The firm has an Overweight rating for the stock.

Sentiment toward Adobe shares plummeted to ‘extremely bearish’ (8) on Stocktwits, the lowest in over a year, reversing from the bullish mood that prevailed a day ago. Message volume spiked to ‘extremely high.’

A Stocktwits user said the stock could drop below $450 due to the soft guidance.

In premarket trading, as of 5:51 a.m. ET, Adobe shares fell 10.08% to $494.50. The stock has pulled back about 8% this year.

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