• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing

I Like Adobe but It's Not Safe to Grab Some Here, Not Yet Anyway

Remember, ADBE does not pay a dividend, so we don't need equity to make hay.
By STEPHEN GUILFOYLE
Dec 10, 2020 | 10:04 AM EST
Stocks quotes in this article: ADBE

Adobe Inc (ADBE) , an old Sarge fave, went to the tape with the firm's fiscal fourth quarter results on Thursday morning. Adobe posted an adjusted EPS of $2.81, which was not only a beat of industry consensus, but earnings growth of 23%. Adobe also recorded record quarterly revenue of $3.42 billion. This was also a beat, and good for growth of 14.4%, in line with growth reported by the firm for both its fiscal Q2 and fiscal Q3.

I have not been in the name since very early September. No, I did not get the top, but it was a good sale, so I skipped the whole "double bottom" thing, as well as this recent weakness that appears to me to possibly be misplaced. That said, let's dig in.

Nuts And Bolts

Breaking sales down across business units, the largest segment remains Digital Media. That group experienced 20% sales growth, landing at $2.5 billion for the period. The Creative side of that segment was dominant, contributing $2.08 billion while the Document Cloud pitched in $411 million. Annual Recurring Revenue (ARR) for the entire Digital Media component met consensus view of $10.18 billion.

Now, Adobe is changing how the firm reports results for the Digital Experience segment. From here on out, Publishing and Advertising will be broken out away from the rest of the unit. For this quarter, Digital Experience posted sales of $877 million including Publishing and Advertising. Ex that break-out, Digital Experience lands at $819 million, which is still 10% growth.

Cash flow from operations this quarter ended up at $1.78 billon, a new record for the firm. Remaining Performance Obligations (RPO) exiting the quarter totaled $11.34 billion. Overall, from top to bottom, Adobe, a cloud king in a class with only one or two other names, had an excellent quarter, and is executing at a truly elite level.

But Wait, There's More....

Let's take a look at guidance. For the current (fiscal first) quarter, Adobe now sees revenue of $3.75 billion, well above consensus view of $3.36 billion, that would result in adjusted EPS of $2.78 versus the $2.59 that the street is looking for. For the entire coming year, Adobe now guides revenue up to $15.15 billion, above the sell-side view of $14.8 billion. The firm expects those sales to lead adjusted FY 2021 EPS to $11.20, which is up a few pennies from where Wall Street is for the quarter.

Perhaps the street is disappointed with the EPS guide? Perhaps the street is looking to take another pound of flesh on Thursday. Perhaps Adobe is being conservative with guidance on profitability. This is what for me remains unknown.

The firm did announce that its board of directors had authorized an additional $15 billion share repurchase program to run through FY 2024. Adobe bought back a rough 1.6 million shares over the past three months. The previous authorization had been for $8 billion, and is expected to be exhausted at some point during H1 2021.

Dangerous Chart

I see two significant patterns under development. First there is the descending triangle that seems supported at $440. That's bearish. Then there is the "double bottom" (traced in red) within the triangle that could be bullish, but the pivot is $519, which is now a long way off. On Thursday morning, the shares will test the 50 day SMA at $579. Short-term, this is what matters most. Managers react to the 50 and 200 day lines more so than they do to any other simple or exponential moving averages that my colleagues will throw at you.

The fact is that I like Adobe. Fact is that it is not safe to grab some here. Not yet anyway. Am I willing to take on equity risk at $440? Yes, I think I am. Right now, I can still get paid $0.50 to $0.60 for $440 puts expiring tomorrow. I think I want to write those if I can get someone to buy them. That market is thinly traded. Even more interesting is the $7 to $8 that the market seems to be paying for January 22nd $440 puts... or we could drop down and write the January $400 puts in order to take on less risk for a lesser premium. Remember, ADBE does not pay a dividend, so we don't need equity to make hay.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Stephen Guilfoyle had no position in the securities mentioned.

TAGS: Dividends | Earnings | Investing | Stocks | Technical Analysis | Trading | Software & Services | Technology

More from Investing

How To Adjust Your Trading Style as Market Conditions Change

James "Rev Shark" DePorre
Mar 25, 2023 10:00 AM EDT

There is no single approach to the stock market that is inherently superior over the long run.

The Chasing Slows on Wall Street

James "Rev Shark" DePorre
Mar 24, 2023 4:34 PM EDT

After Deutsche Bank shakes up investors, market cools a bit, which might be a healthy development.

Stay Away From These Types of Stocks, They're Radioactive

Jim Collins
Mar 24, 2023 2:35 PM EDT

Here's what you're better off buying. I certainly have.

GE Looks Poised for a Pullback: How to Trade It Now

Bruce Kamich
Mar 24, 2023 1:45 PM EDT

The shares stopped short of my price targets.

See SPOT Run ... Down

Bruce Kamich
Mar 24, 2023 1:23 PM EDT

Spotify looks like it is poised for a downside price correction, according to the charts.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 01:56 PM EDT PETER TCHIR

    Very Cautious

    I am very cautious here. I don't like how the c...
  • 08:58 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    How to Adjust Your Trading Style as Market Conditi...
  • 05:00 PM EDT CHRIS VERSACE

    AAP Podcast on the Fed Decision!

    Listen here!
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2023 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login