Adobe Gains 15% as AI Drives Revenue and Profits Higher: Why it May Not Be Time to Buy ADBE Yet

Shares of Adobe (ADBE) got a 15% boost yesterday after the company reported Q2 earnings that surpassed expectations on both the top and bottom lines, fueled by AI growth. The stock is up another 15% in pre-market trading Friday morning.

Revenue of $5.31 billion was narrowly above the Wall Street estimate of $5.29 billion. The company itself was expecting to deliver results in the range of $5.25 to $5.30 billion.

On the profitability front, Adobe posted a 10% improvement year over year to $4.48 per share excluding expenses like stock compensation. The consensus called for $4.39 per share, while the company’s previous guidance was $4.35 to $4.40. Net profit of $1.573 billion was a substantial increase year over year from $1.295 billion in 2023.

CEO Shantanu Narayen attributed the results to AI technology across the company’s arsenal of offerings. Adobe has invested heavily into this tech, and is finally starting to see an ROI from monetization across digital media and experience segments.

This can be seen in the company’s annualized recurring revenue (ARR) figure of $487 million, which offers insight into how subscription-based products are performing. The forecasted ARR was just $440 million.

There’s been ongoing concern not just for Adobe, but tech companies in general, that AI was overhyped and could never really offer a return on investment – serving as more of a distraction. Analysts like Charlie Miner with Third Bridge suggest that this was a turning point in which the company managed to prove the benefits of this emerging technology, but there is still a way to go.

For the current quarter, Adobe is expecting to deliver revenue in the range of $5.33 to $5.38 billion alongside earnings of $4.50 to $4.55 per share, which is just below the analyst outlook on the top line and narrowly above the bottom line consensus.

That being said, where does this latest update leave investors? Is it time to buy ADBE after yesterday’s rally and the outlook for Q3? We took a look through the VectorVest stock software and found 3 things you need to consider first.

ADBE Has Very Good Upside Potential and Safety, But Timing is Still Poor

VectorVest simplifies your trading strategy by delivering clear, actionable insights in just 3 simple ratings. These are relative value (RV), relative safety (RS), and relative timing (RT). Each sits on a scale of 0.00-2.00, with 1.00 being the average. 

This makes interpretation quick and easy, saving you time and stress while empowering you to win more trades. But it gets even better - you’re given a buy, sell, or hold recommendation for any given stock at any given time based on its overall VST rating. As for ADBE, here’s what you need to see:

• Very Good Upside Potential: The RV rating compares a stock’s long-term price appreciation potential (based on a 3-year price projection), AAA corporate bond rates, and risk. This in-depth analysis provides far superior insights than the typical comparison of price to value alone. ADBE has a very good RV rating of 1.32. The stock is undervalued at its current price of $458/share with a value of $505/share.
• Very Good Safety: The RS rating is a risk indicator. It’s calculated from a deep analysis of the company’s financial consistency & predictability, debt-to-equity ratio, business longevity, sales volume, price volatility, and other factors. ADBE has a very good RS rating of 1.37.
• Poor Timing: The RT rating assesses the price trend behind a stock. It’s based on the direction, dynamics, and magnitude of the stock’s price movement day over day, week over week, quarter over quarter, and year over year. The one thing holding ADBE back right now is a poor RT rating of 0.81, but hopefully for investors, the stock’s rally in the right direction will change this soon.

The overall VST rating of 1.17 is good, but poor timing is holding the stock back right now - it’s currently rated a HOLD in the VectorVest system. 

Get a free stock analysis to learn more and stay up to date on this opportunity to see how the stock performs in the days ahead - it could be time to buy ADBE before you know it, and you’re not going to want to miss out.

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Use VectorVest to analyze any stock free. VectorVest is the only stock analysis tool and portfolio management system that analyzes, ranks and graphs over 18,000 stocks each day for value, safety, and timing and gives a clear buy, sell or hold rating on every stock, every day.

VectorVest advocates buying safe, undervalued stocks, rising in price. ADBE is up 15% this week after yesterday’s rally, driven by AI-fueled earnings improvements and investor excitement that these tech investments are starting to pay off. The stock itself has very good upside potential and safety, but poor timing is holding it back.

Before you invest, check VectorVest! Click here to ANALYZE ANY STOCK FREE and see our system in action!