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Why Is Adobe Stock Beating the Market amid COVID-19?


Jun. 16 2020, Published 7:33 a.m. ET

Adobe (NASDAQ:ADBE) shares are in hot demand right now. The stock is beating the market. At $406 per share, Adobe has risen 23% year-to-date. In comparison, the S&P 500 Index is down 6.0% for the year.

Adobe is known for its creative apps like Photoshop. The apps are popular in media production. However, the company has a diversified business. For example, the company also operates in the e-commerce and marketing sectors.

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Adobe stock draws investors

Adobe products and services are in high demand right now. Due to coronavirus movement restrictions, more households have been shopping online. As a result, retailers want to increase their online sales. Adobe has seen increased demand for its e-commerce tools.

Also, the shift to working remotely in the wake of the coronavirus outbreak has boosted the uptake of Adobe’s cloud-based products like its creative apps. Investors have been flocking to Adobe stock. Overall, the company’s business has benefited from pandemic-driven demand. Shares of e-commerce companies like Amazon, eBay, and Shopify have been soaring due to the pandemic demand.

Adobe delivers impressive earnings

Adobe reported its results for the second quarter of fiscal 2020 on June 11. The company delivered revenue of $3.13 billion, which rose 14% year-over-year. The revenue was mainly in line with the consensus estimate of $3.16 billion. Adobe posted an adjusted EPS of $2.42, which beat the consensus estimate at $2.33. Adobe stock soared to a record high due to the earnings results. Indeed, the strong results showed that Adobe is a promising investment during the pandemic.

The general shift to digital life around the world also works in Adobe’s favor.

In the earnings report, Adobe CEO Shantanu Narayen said, “The tectonic shift towards ‘all things digital’ across all customer segments globally will serve as a tailwind to our growth initiatives as we emerge from this crisis.”

Shareholder capital return programs

Companies with shareholder capital return programs present an added advantage for investors during COVID-19. In May 2018, Adobe unveiled an $8.0 billion stock repurchase program.

Adobe’s stock repurchase program returned $850 million to shareholders during the company’s fiscal second quarter. The company has $3.4 billion remaining under the repurchase program. Investors see that as a sign that Adobe will continue to put back money in their pockets, which drives the demand for the stock.


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