Despite strong Q4 results, Adobe faces downgrades as fiscal 2024 guidance disappoints analysts
Adobe shares experienced their steepest decline since September 2022, falling 14 percent on Thursday after the company issued revenue guidance below analyst expectations.
CNBC reports that the software vendor projected fiscal first-quarter sales between US$5.63bn and US$5.68bn, falling short of the US$5.73bn average estimate from analysts polled by LSEG.
Despite the underwhelming guidance, Adobe’s fourth-quarter results exceeded expectations.
Adjusted earnings per share reached US$4.81, surpassing the US$4.66 average estimate. Fourth-quarter revenue increased 11 percent to US$5.61bn, also beating analysts' forecast of US$5.54bn.
Adobe’s forecast contrasted with its strong fourth-quarter results, leading to mixed reactions from analysts.
TD Cowen downgraded Adobe to a hold rating from buy, while Wells Fargo maintained a buy rating but described 2024 as “frustrating” for the company.
Adobe’s growth strategy relies on monetizing generative artificial intelligence (AI), with offerings such as Firefly image generation and additional tools within the Creative Cloud.
Analysts at Deutsche Bank lowered their price target for Adobe from US$650 to US$600 but maintained a buy rating.
“These results and guidance require a bit of faith in the full year next year,” Deutsche Bank analysts stated, adding, “We see tangible evidence that Adobe is one of few application software companies in our coverage successfully monetizing generative AI today.”
Adobe shares have dropped 20 percent in 2023, significantly underperforming the Nasdaq, which is up 33 percent and crossed the 20,000 threshold for the first time on Wednesday.
Adobe’s disappointing guidance has further dampened investor sentiment, reflecting challenges in balancing its AI-driven growth initiatives with market expectations.
