Adobe's Shares Tanked But Its Business Is as Healthy as Ever

Last Thursday, Adobe Inc ADBE shares dropped 10% as investors punished the company for lower guidance that the Chairman and CEO Shantanu Narayen blamed on timing and foreign exchange, assuring that the business is as healthy as it has ever been. But its stock had its second-worst day in a decade, tanking 10%, which was only topped by the 15% fall last March when COVID-19 started its relentless march across the globe.

Fiscal 2021 fourth quarter

For the three months ended on December 3^rd, revenue grew 20% YoY to $4.11 billion fueled by 21% growth in the company's digital media segment. Adjusted earnings per share (EPS) were up 14% to $3.20. Both figures slightly outperformed guidance, wrapping up 2021 as a great year in which the creative software maker succeeded to forget about its fall from the beginning of the pandemic that was simply caused by uncertainty.

Unfavorable foreign currency terms

For months now, the U.S. dollar has been strengthening against various foreign currencies. According to FactSet, the U.S. contributes slightly above 52% to Adobe's revenue.

An additional fact to consider

The undergoing fiscal first quarter will last for 13 weeks this year, as opposed to fiscal 2021's 14 weeks as its 2021 calendar included an additional week. The creative software leader is returning to a 52-week fiscal year.

The reason for concern?

Over the past year, Adobe has made two acquisitions: Workfront, which is a marketing workflow management outfit and Frame.io, a video collaboration platform. Considering the hype around digital content creation, many investors were clearly expecting these recent additions to contribute more to Adobe's own organic growth.

Fiscal first quarter and full-year guidance

Adobe expects revenue for the February quarter to amount to $4.23 billion, below Wall Street's $4.34 billion expectation that Refinitiv reported. As for full-year revenue, it is guided at $17.9 billion, also below Wall Street's expectations of $18.16 billion.

Competitors

Adobe is still the champion of creative software so there is no reason to doubt its track record of steady revenue and growing profitability will continue well into 2022.

But the space is crowded with Autodesk Inc ADSK, Unity Software Inc U, Salesforce.com Inc CRM, DocuSign Inc DOCU, and even NVIDIA Corporation NVDA with the recent commercial launch of its Omniverse software.

The verdict

Perhaps Adobe's days as a 20%-plus growth enterprise are indeed over, but this also seemed possible right before the pandemic back in 2019, before its trajectory accelerated again. Despite the creative software maker's weaker-than-expected guidance due to unfavorable foreign exchange terms, Adobe is as strong as ever because the creative economy runs on its software with creative workers having becoming more important for the global economy than ever before. Speaking to CNBC's Jim Cramer, Narayen was confident in the company's future, emphasizing that weaker-than-expected guidance is by no means a red flag for Adobe's business which is as healthy as ever.

This article is not a press release and is contributed by a verified independent journalist for IAMNewswire. It should not be construed as investment advice at any time please read the full disclosure. IAM Newswire does not hold any position in the mentioned companies. Press Releases – If you are looking for full Press release distribution contact: press@iamnewswire.com Contributors – IAM Newswire accepts pitches. If you're interested in becoming an IAM journalist contact: contributors@iamnewswire.com

The post Adobe's Shares Tanked But Its Business Is as Healthy as Ever appeared first on IAM Newswire.

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. The content was purely for informational purposes only and not intended to be investing advice.

Image Sourced from Pixabay