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Factors that Boosted the Market’s View of Adobe Stock

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Apr. 9 2018, Updated 8:35 a.m. ET

Adobe stock touched an all-time high

So far in this series, we have discussed the fall in Facebook (FB) stock, which had a significant impact on other tech companies’ stock movement and the overall stock market. Amid the tech sector sell-off, Adobe (ADBE) that reached an all-time high of $231.34 per share in mid-March. Currently, the stock is trading at $231.00 and has risen 22.0% in 2018 year-to-date.

As the chart below shows, Adobe hasn’t missed analysts’ revenue expectations in the last 14 quarters. On the EPS (earnings per share) front, Adobe’s performance has been excellent and hasn’t missed expectations in the last 14 quarters. The current optimistic market sentiment around Adobe stock stems from the company’s consistently improved performance and its record of meeting or exceeding analysts’ expectations.

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Adobe’s unique positioning

In fiscal 2Q18, Adobe reported revenues and non-GAAP[1. generally accepted accounting principles] earnings per share of ~$2.1 billion and $1.55, respectively, which exceeded analysts’ expectations by $30.0 million and $0.11. With its three key business offerings—Creative Cloud, Experience Cloud, and Document Cloud—Adobe expects its TAM (total addressable market) to reach $83.0 billion by 2020.

Adobe is addressing a massive market, which has lower market penetration and no prominent competitor. This scenario translates to substantial revenue growth as well as margin expansion potential going forward.

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