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Adobe shares tank despite upbeat FQ4 print

 

Friday, December 15, 2023

Today’s headlines

What’s happening: Shares of Adobe fell sharply on Thursday, after the company released results for its fiscal fourth quarter.

What happened: Adobe reported its quarterly sales and earnings higher than market expectations.

However, the company issued disappointing weak guidance for both the current quarter and fiscal 2024, which exerted pressure on the stock.

How were the results: The San Jose, California-based company reported low single-digit growth in sales for the quarter ended December 1.

  • Revenues grew by 11.6% year-over-year to $5.05 billion, surpassing the consensus estimates of $5.03 billion.
  • Earnings surged 18.6% to $4.27 per share and topped Wall Street expectations of $4.14 per share.

Why it matters: Sticky inflation and elevated interest rates have forced people and businesses to cut down their spend, weighing on Adobe’s results.

Adobe increased prices for some of its offerings in November, which further impacted demand for its products.

The graphics-software stalwart was also facing regulatory scrutiny regarding its subscription models as well as a probe into its $20 billion acquisition of Figma by Britain’s competition watchdog.

Adobe’s Creative Cloud revenues rose 12% year-over-year, or 14% in constant currency, to $3.00 billion in the fiscal fourth quarter. The Digital Experience segment reported revenue growth of 10%, while Digital Media’s revenue growth came in at 13%, with net new ARR (annual recurring revenue) of a higher-than-expected $569 million.

The company guided to revenues between $5.1 billion and $5.15 billion for the current quarter, below market views of $5.19 billion. It expects total revenue in the full year to be between $21.30 billion and $21.50 billion, short of market expectations of $21.73 billion.

Several analysts said the guidance was conservative and expressed optimism around Adobe’s GenAI-related prospects.

How shares responded: Adobe’s shares tanked 6.4% to close at $584.64 on Thursday, following the release of quarterly results. The stock has added 74% year to date.

What to watch: Investors will continue monitoring inflation levels and interest rates. Markets will also watch advancements in the use of GenAI in Adobe’s product suites.

The markets today

The euro will be in focus today ahead of a basket of economic reports

Context: The EUR/USD forex pair surged to a two-week high on Thursday, following the ECB’s interest rate decision.

Details: The European Central Bank kept its benchmark interest rates unchanged for the second straight meeting, as it revised its GDP growth projections for the region lower.

The ECB was widely expected to leave rates unchanged following a sharp decline in Eurozone’s inflation levels. The Bank of England had also maintained its key rate during Thursday’s meeting.

On Wednesday, the Federal Open Market Committee held interest rates in a range between 5.25% and 5.5%, with the US central bank’s policymakers suggesting rate cuts to 4.6% by the end of 2024.

Weakness in the US dollar also lent support to the EUR/USD forex pair on Thursday. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell around 0.9% to 101.96.

The EUR/USD forex pair gained over 1% to reach 1.0994 on Thursday. The STOXX Europe 600 Index added 0.87% to close at 476.57, after surging to its strongest level since January 2022 earlier in the session.

London’s FTSE 100 gained 1.33% to close at 7,648.98, while France’s CAC 40 added 0.59% to 7,575.85. Germany’s DAX 40 bucked the trend and fell 0.08% to settle at 16,752.23.

What to watch: Investors await the release of economic data on manufacturing PMI, services PMI, composite PMI and balance of trade from the Eurozone today. The HCOB Eurozone manufacturing PMI is expected to rise to 44.4 in December, from 44.2 in November, while services PMI is projected to increase to 49.3 in December, from 48.7 in the previous month.

The Eurozone, which had reported a trade surplus of €10 billion in September, is expected to record a higher surplus of €14.0 billion in October.

Other Markets: US trading indices closed mostly higher on Thursday, with the Dow Jones index and S&P 500 up by 0.43% and 0.26%, respectively, and the Nasdaq 100 down by 0.15%.

The news shaping the markets

Russian President Vladimir Putin said the country’s goals in Ukraine had “not changed.” The news sent the RUB/USD forex pair higher this morning.


Japan’s au Jibun Bank manufacturing PMI fell to 47.7 in December, from 48.3 in the prior month, exerting pressure on the JPY/USD forex pair.


Australia’s Judo Bank flash manufacturing PMI rose to 47.8 in December, from 47.7 in the prior month. However, the manufacturing sector remaining in the contraction zone for the tenth consecutive month sent the AUD/USD pair lower in forex trading this morning.


New Zealand’s BusinessNZ performance of manufacturing index improved to 46.7 in November, versus 42.5 a month ago. The manufacturing sector remaining in the contraction zone for the ninth month in a row exerted pressure on the NZD/USD forex pair.


Mexico’s central bank held its benchmark policy rate at 11.25% at its latest meeting, sending the MXN/USD pair lower in forex trading this morning.

What else to watch today

France’s inflation rate, composite PMI, manufacturing PMI and services PMI, Turkey’s central government budget balance, Germany’s composite PMI, manufacturing PMI and services PMI, Italy’s inflation rate and balance of trade, UK’s composite PMI, manufacturing PMI and services PMI, Eurozone’s hourly labour costs and wage growth, Bank of Russia’s interest rate decision, India’s value of loans, value of deposits, foreign exchange reserves and balance of trade, Brazil’s IBC-Br economic activity index, Canada’s Housing starts, foreign investment in securities and wholesale sales, US NY Empire State manufacturing index, industrial production, manufacturing production, composite PMI, manufacturing PMI and services PMI and Baker Hughes crude oil rigs, as well as Argentina’s GDP growth rate.


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