Adobe will release Q2 fiscal 2023 earnings after the close. The stock has been rising sharply recently as investor react to AI potential. Shares are up 46% since May 12. The price is up 44.5% in 2023.
The expectations:
- For the quarter ending May, Wall Street analysts anticipate the company to earn $3.79 per share on revenue of $4.77 billion. This is an increase from the previous year's Q2 results, when earnings were at $3.35 per share on revenue of $4.39 billion.
- For the full year, ending in November, earnings are projected to increase by 12% year-over-year to $15.50 per share, while full-year revenue of $19.3 billion would mark a 9.6% rise year-over-year.
- For Q3 fiscal, ending in August, sales are anticipated to be $4.86 billion, with profits of $3.88 per share according to FactSet surveyed analysts.
Adobe's most recent forecast for the November 2023 fiscal year predicts non-GAAP profits of $15.30 to $15.60 per share. This is inline with the analysts expectations of $15.50.
Adobe's primary sources of revenue are its two main operating segments: Digital Media and Digital Experience. The latter accounts for over 70% of the company's total revenue.
During Q1, Adobe experienced a 13% increase in quarterly profit, with Q1 revenue rising 9% to $4.66 billion. Revenue from the company's Digital Media segment, which includes Creative Cloud, was $3.4 billion.
The company's expansion into generative AI is an area of interest for investors. Adobe has introduced new features, such as Sensei GenAI and Firefly, to improve its product offerings and user experience.
Adobe has also partnered with Google's Bard to extend the reach of Firefly and potentially increase user engagement.
Looking at the daily chart above, the all-time high price reached just short of $700 back in November 2021. The low price was reached in September 2022 at $275.17. This week the price extended above the 50% midpoint of that move to the downside at $487.44. With the last surge to the upside in the major indices, the price is currently back above that midpoint level trading at $490.19. Will the price gap higher in the new trading day tomorrow and away from the 50% retracement level, or gap below the 50% retracement level?
Unfortunately, much will depend upon the earnings, and probably the expectations going forward.
A gap higher, and traders will target $500 and then $537.48 (the 61.8% retracement)
Conversely, should the price gap lower instead, the gap from June 8 between $440.38 to $453.09 will be targeted as support.
Wells Fargo Securities analyst Michael Turrin has upgraded Adobe stock to Overweight and raised the 12-month price target from $375 to $525. The stock closed at $487 today.