How Has Adobe Stock Performed?

Adobe (ADBE) stock rose 8.7% to close at $222.95 on December 26. Adobe stock has generated returns of 27% since the start of 2018. It has fallen close to 17.5% since October and has slipped 11% this month. The stock has generated returns of 135% in the last three years and 273% in the last five years.

Out of the 31 analysts covering Adobe, 25 recommend a “buy,” six recommend a “hold,” and none recommend a “sell.” The average 12-month stock price target for Adobe is $290, indicating an upside potential of 31% from current levels.

Adobe’s sales are expected to rise by 27.6% to $11.14 billion in fiscal 2019 (year ending in November) and 17.8% to $13.12 billion in 2020. Sales might further rise by 14% to $14.92 billion in 2021. The company’s earnings per share are expected to rise by 41% in 2019 and then rise by 24% in 2020.

Adobe’s EPS are expected to rise at a CAGR (compound annual growth rate) of 22.7% over the next five years compared to an annual gain of 48% in the last five years.

Given its robust revenue and earnings growth, Adobe’s forward 2019 PE ratio of 35.5x doesn’t look that expensive. Its forward 2020 PE ratio is estimated to be 27.6x, and the stock might be undervalued at current levels.