Adobe Stock Dips on Slashed Guidance, Citi Says Outlook Could Disappoint Again By Investing.com

By Senad Karaahmetovic

Shares of Adobe (NASDAQ:) are down over 3.3% in pre-open Friday after the company reported FQ2 results and slashed its full-year guidance.

Adobe an adjusted EPS of $3.35 to beat the $3.31 expected by the market. Revenue came in at $4.39 billion, up 14% YoY and again higher than the $4.35 billion consensus.

For this quarter, Adobe said it expects to earn $3.33 per share on revenue of $4.43 billion. Analysts were looking for EPS of $3.40 on sales of $4.52 billion.

The full-year revenue guidance was cut to $17.65 billion from $17.90 billion, below the $17.86 billion consensus. The profit outlook was also slashed as Adobe now expects to see full-year EPS of $13.50, vs $13.70 prior, and again below the $13.68 consensus.

The company said updated guidance factors in FX headwinds of about $175 million for the second half of its fiscal year.

Analysts slashed price targets on Adobe stock with Piper Sandler seeing an “elevated Q4 execution risk” that has emerged as a new overhang.

Oppenheimer analyst Brian Schwartz moved to $400.00 per share from $560.00 to reflect “soft” guidance.

“ADBE shares may remain under pressure near-term given an inconsistent execution trend in the reported results, and until investors can gain comfort that the expected declines in F3Q net new Digital Media ARR and the operating margin are transitional, and EPS growth can return to growing faster than revenue,” Schwartz told clients in a note.

Citi analyst Tyler Radke saw “good” results but added that the offered guidance “leaves some questions.” Radke also cut the price target to $380.00 per share from $425.00 on the Neutral-rated stock.

“The outlook was controversial with Q3 below the street and worse than last Qs expectations for greater QoQ growth, with commentary suggesting enterprise summer seasonality concerns, which we translate to incremental deal slippage/macro headwinds. Interestingly the full year guide for DM NNARR was maintained suggesting more aggressive sequential Q4 growth. Although pricing will be a greater tailwind, we see risk that guidance could disappoint again (similar to Q2/Q3). We reiterate our neutral rating as we see ADBE susceptible to the weaker macro backdrop, potentially exacerbated by low-end competition,” Radke wrote in a research note.