Is Adobe a buy into earnings?

Its time to breakdown a computer software giant. Here is the breakdown on $ADBE otherwise known as Adobe.

Current Price: $473.00

52/Wk High: $536.88

52/Wk Low: $255.1314

Read below for the breakdown!

Adobe Systems is a software giant that offers a huge span of software products. Adobes products include offerings for three core operating segments which include Publishing, Digital Media, and Digital Experience. 

$ADBE stock can be broken down into main segments the company offers. According to TREFIS (@trefis), Digital Media makes up 68.8% of Adobe’s stock price.

Furthermore, Digital Experience makes up 30.4% of the stock price and Publishing makes up 0.7% of the stock price. Finally, Cash makes up 0.1%. 

The thesis on Adobe is like most software companies lately. Due to COVID-19 and digital advancement, it is expected that Adobe has also seen massive growth, and analysts have continued to upgrade the stock going into earnings next week. 

Recently Cowen upgraded $ADBE and raised their price target to a whopping $555/share, citing work from home tailwinds. 

Digging into the last earnings report the numbers were fantastic per usual. Adobe delivered a Q2 beat with an EPS of $2.45 versus the analyst’s consensus EPS of $2.33.

Revenue also grew throughout Q2. Adobe delivered Q2 revenue of $3.13 billion, up 14.0% YOY. Not only that but Q2 subscriptions continued to grow, adding 17% YOY which totals $2.87 billion. 

Adobe also delivered solid guidance for Q3. $ADBE management expects $3.15 billion in revenue for Q3 and a non-GAAP EPS of $2.40.

When exploring Adobe’s financial standing there is not much to hold the company back. When last reported Adobes Total Debt level was $4.114 billion but total cash on hand totaled $4.351 billion as of May 31st.

Given all the positivity within the financials, the analysts have been bullish on Adobe. Currently, the average price target is $468.28/share representing a loss of -0.65% but bullish price target upgrades continue to roll in. 

On a more positive note, several upgrades have dropped in the past few days. The high price target is now $570.00/share, representing a 20.93% upside while the low price target is $410.00/share, representing a -13.02% downside.

While analysts are mostly bullish on Adobe the big money is extremely bullish. Currently, 84.75% of Adobe is owned by institutions. Top holders include BlackRock Institutional Trust, Fidelity Management & Research, and The Vanguard Group Inc.

It is also important to note that $ADBE currently trades at a price to earnings multiple of 62.76 and a price to sales ratio of 18.97.

When taking a look at the technicals it seems that Adobe is presenting a solid opportunity going into earnings.

Looking at the six-month charts the RSI sits at a respectable 47.99 which is not a bad place to start a position simply based on RSI. On the otherhand, RSI is not everything and other technicals must be taken into consideration.

The six-month CCI sits at -35.40 and the MACD sits within a wider downward momentum range of 13.31 to 7.09.

Rounding out the technical analysis, $ADBE has pulled back roughly 12% off the highs, representing a nearly 64 point decline.

Overall I like Adobe going into earnings and even after. With a consistent history of beating on earnings along with a massive COVID-19 tailwind and several upgrades, I believe $ADBE is a buy. 

Long term Adobe is a sure-fire winner, in the near term the stock has been running with the NASDAQ to a pin, and it will take a solid earnings beat to project the stock higher in a minimal amount of time. 

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Disclaimer: This is not direct financial advice, simply opinion based on independent research. Luke Donay and Running With The Money are not responsible for any investment made based on the published information.