Thursday, December 10, 2020

Will Adobe’s Stock Rebound After Q4 Results?

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News shaping
the markets today

     

What’s happening: Adobe Systems is scheduled to report its fiscal fourth-quarter results before the opening bell today.

What happened: Adobe’s stock, which has the tenth highest market capitalisation in the Nasdaq 100 index had climbed to record highs in September. However, shares plummeted by more than 4% even after the company reported strong results for the third quarter.

Since then, the stock has been trading within the same range, yielding almost no quarterly returns for investors. It will be interesting to see whether Adobe’s shares are able to make a comeback after the release of the latest quarter’s results.

What are the estimates: The software maker is projected to report a rise in both sales and earnings for the fourth quarter.

  • Revenues are expected to grow 12% to $3.36 billion.
  • Earnings are estimated at $2.68 per share, representing a 17% rise on the year.

Why it matters: Adobe’s stock remained under pressure through the latest quarter. Various key investors offloaded their exposure, while hedge funds activists Dan Loeb and Keith Meister also lowered their positions in the company.

Adobe recently announced the acquisition of Workfront for $1.5 billion, which was the only big news since the previous quarter’s earnings report. The company expects the deal to boost the sales of its Experience Cloud product line.

Analysts expect Adobe’s customer base to expand, as the company’s software provides support to students and teachers for distance learning. The company had witnessed robust demand for its Digital Media Solutions in the previous the quarter, and the trend is likely to have continued in the fourth quarter, led by strong growth in Document Cloud and Creative Cloud.

The continued reliance on the work-from-home model by companies across the globe should have resulted in higher demand for digital documents, further boosting the use of Abode’s Acrobat PDF services.

How shares performed so far: Adobe’s shares slipped 2.3% to close at $483.74 on Wednesday only to fall another 1.2% in after-hours trading. The stock has added merely 0.9% over the past three months.

What to watch: Expectations for Adobe’s fiscal fourth-quarter results are high due to continued remote work and learning trends. Investors will closely monitor the results and the earnings call for guidance for the next year.

The Markets Today

     

US stocks will be in focus today, ahead of some key economic reports scheduled for release later in the day.

Context: Wall Street closed lower on Wednesday with investors selling technology stocks on hopes of a covid-19 vaccine rollout resulting in increased economic activity and growth.

Details: A sharp decline in technology stocks sent Wall Street lower on Wednesday, although some buying took place in sectors that have so far been hurt by the covid-19 crisis.

After delivering its 50th record closing of the year on Tuesday, the tech-laden Nasdaq 100 dipped moved sharply lower by 243.82 points to settle at 12,338.95 yesterday.

Negotiations around fresh government aid continued to impact market sentiment, with US Treasury Secretary Steven Mnuchin offering a stimulus package worth $916 billion on Tuesday. However, the Democrats still wish to go ahead with the previous bipartisan package of $908 billion.

Meanwhile, covid-19 cases continued to rise, with the global tally of cases climbing above the 68.8 million mark and the death toll surging past 1.56 million. Against this backdrop, investors look forward to the FDA’s meeting today to review the covid-19 vaccine candidate submitted jointly by Pfizer and its German partner BioNTech. The UK has already started distributing this vaccine to its most vulnerable population. The FDA is also scheduled to meet on December 17 to review Moderna’s vaccine candidate.

The Dow Jones index shed 105.07 points and closed at 30,068.81 on Wednesday, while the S&P 500 declined 0.8% to end at 3,672.82, with the energy and consumer discretionary sectors providing some support to the index.

What to watch: Investors await data on inflation and initial jobless claims from the US. The annual inflation rate in the US is expected to ease to 1.1% in November, from 1.2% in October. Initial jobless claims are projected to rise to 725,000 in the latest week, from 712,000 in the prior week.

Covid-19 remains a leading concern for investors, with total cases surpassing 15.3 million in the US.

Other Markets: European trading indices closed mostly higher on Wednesday, with the FTSE 100 and German DAX 30 up by 0.08% and 0.47%, respectively, while the French 40 bucked the trend and declined by 0.25%.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Tukey’s unemployment rate and foreign exchange reserves, UK’s balance of trade, construction output, industrial production, goods trade balance and GDP, France’s industrial production, South Africa’s current account balance, mining production, gold production, manufacturing production and building plans passed, Russia’s total vehicle sales, Brazil's retail sales, ECB’s interest rate decision as well as the US EIA’s natural gas stockpiles.