Mizuho analyst Gregg Moskowitz downgraded
stock to Neutral from Buy a few days before the software company releases fiscal-third-quarter earnings.
(ticker: ADBE) faced a “more difficult environment than expected,” Moskowitz wrote. He also cut the price target to $440 from $480. Adobe stock was down 0.8% to $391.68 on Monday, while the
index was up 1.1%. The stock has fallen 31% year to date.
The company, which owns brands including Photoshop and Illustrator, had in June provided softer-than-expected guidance for both the August quarter and the full year due to negative effects from exchange rates and the war in Ukraine.
The company is set to report earnings on Thursday after the closing bell. “The good news is that Adobe guided to a low bar for the fiscal third quarter, and thus we expect Adobe will report slight upside to our and the Street’s [quarterly] revenue estimate of about $4.43 billion (up 13% year-over-year).”
But “we wouldn’t be surprised by a guide down for the fiscal fourth quarter,” Moskowitz wrote. “We also believe Street revenue and earnings-per-share estimates for FY23 look too high.”
The analyst cut his outlook. He lowered the fiscal-fourth-quarter revenue and earnings-per-share estimates to $4.54 billion and $3.42, respectively, from $4.57 billion and $3.44, “which is further below consensus of $4.59 billion and $3.47.” Moskowitz lowered the fiscal 2023 revenue and earnings-per-share estimates to $19.6 billion and $15.39, respectively, from $20.16 billion and $15.82, respectively, compared with Street estimates for $20.2 billion and $15.90. He also introduced fiscal 2024 revenue and earnings-per-share estimates of $22.3 billion and $17.84, respectively.
“Adobe has exhibited fundamental choppiness over the past few quarters, and a tighter macro environment may add some pressures,” Moskowitz wrote. “Notwithstanding a somewhat depressed valuation, our belief is that the stock will likely be rangebound over the near- to medium-term.”
Write to Angela Palumbo at [email protected]