Adobe Earnings Preview: What to Expect This Week
Adobe Earnings Preview: What to Expect This Week
By:Mike Butler
An important focal point for Thursday's earnings call will be Adobe's plan to monetize generative AI
- Adobe is set to report quarterly earnings on Thursday, after the market closes,
- Adobe continues to beat EPS and revenue estimates quarter after quarter.
- Experts expect EPS of $4.38 on $5.15 billion in revenue from Adobe on this earnings call.
Adobe (ADBE) is one of the few stocks involved in the artificial intelligence sector that is down so far this year.
After opening 2024 trading at $589.51, the software company is trading just over $575 today. Adobe looks to recoup losses during its earnings call on Thursday, March 14 after the market closes at 3:05 p.m. CDT.
Analysts expect earnings per share (EPS) of $4.38 on $5.15 billion in revenue.
Optimism last quarter
Last quarter, Adobe's CEO Shantanu Narayen shed some positive light on fiscal 2023 and was optimistic about 2024.
“Adobe drove record revenue of $19.41 billion in FY23 and 17% year-over-year EPS growth," he said last quarter, "with strong momentum across Creative Cloud, Document Cloud and Experience Cloud. Adobe’s strategy, category leadership, ground-breaking innovation, exceptional talent and global customer base position us well for 2024 and beyond.”
ADBE stock has a relatively large, expected move relative to the stock price, with the options market pricing in a +-$41.08 expected move this week with the stock trading higher today just over $575 per share. That's about 7% of the stock price, which is above the average range of around 5% we've seen from the tech sector so far this earnings season.
Like other AI stocks, we see front-loaded implied volatility in Adobe. This just means the market is placing a lot of weight on Thursday's earnings call relative to the expected move through further-dated monthly options cycles.
Looking forward to December of this year, we can see an expected stock price move of +-$137.89. This week alone makes up for about 30% of the expected stock price range through the rest of the year. In a few days, we will see what sort of sentiment Adobe executives give us for 2024, and whether it has beaten or fallen short of expectations for the quarter.
Bullish on Adobe for Earnings
Adobe stock has stayed above the lower-bound of the expected move for most of the past few earnings announcements, and EPS and revenue estimates are higher than the numbers Adobe reported the previous quarter.
If you're bullish on ADBE, you may think that the stock's turbulence so far this year can be offset by a strong earnings call and guidance for 2024. We've seen a lot of AI stocks soar to the upside this year, and the market is pricing in a bit of call skew this week, which means a high-velocity move is perceived to be to the upside:
This doesn't mean the stock will move up, but it does mean the options market is leaning towards the upside for a high velocity move. It's more expensive to hedge risk and/or participate in speculation to the upside.
Bulls will likely want to hear positive results and plans for generative AI, with products like Adobe Sensei & Adobe Firefly leading the charge.
Bearish on Adobe for Earnings
Adobe is a popular tech company with household name products like Adobe Photoshop, but the stock price has almost doubled from the summer of 2023.
Adobe currently has a price to earnings (P/E) ratio of 47, which exceeds the likes of Microsoft (MSFT), Apple (AAPL), Tesla (TSLA) and other popular stocks. Traders that are bearish on Adobe may see this "premium" price as a selling point, as any miss from Adobe on this earnings call could send the stock lower.
Tune in to Options Trading Concepts Live at 11. a.m. CDT on Thursday, March 14, ahead of the earnings call for an in-depth look at options strategies.
Mike Butler, tastylive director of market intelligence, has been in the markets and trading for a decade. He appears on Options Trading Concepts Live, airing Monday-Friday. @tradermikeyb
For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.
Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.
tastylive content is created, produced, and provided solely by tastylive, Inc. (“tastylive”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involve risk and may result in a loss greater than the original amount invested. tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastylive is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request. tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer. Options, futures, and futures options are not suitable for all investors. Prior to trading securities, options, futures, or futures options, please read the applicable risk disclosures, including, but not limited to, the Characteristics and Risks of Standardized Options Disclosure and the Futures and Exchange-Traded Options Risk Disclosure found on tastytrade.com/disclosures.
tastytrade, Inc. ("tastytrade”) is a registered broker-dealer and member of FINRA, NFA, and SIPC. tastytrade was previously known as tastyworks, Inc. (“tastyworks”). tastytrade offers self-directed brokerage accounts to its customers. tastytrade does not give financial or trading advice, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastytrade’s systems, services or products. tastytrade is a wholly-owned subsidiary of tastylive, Inc.
tastytrade has entered into a Marketing Agreement with tastylive (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade. tastytrade and Marketing Agent are separate entities with their own products and services. tastylive is the parent company of tastytrade.
tastycrypto is provided solely by tasty Software Solutions, LLC. tasty Software Solutions, LLC is a separate but affiliate company of tastylive, Inc. Neither tastylive nor any of its affiliates are responsible for the products or services provided by tasty Software Solutions, LLC. Cryptocurrency trading is not suitable for all investors due to the number of risks involved. The value of any cryptocurrency, including digital assets pegged to fiat currency, commodities, or any other asset, may go to zero.
© copyright 2013 - 2024 tastylive, Inc. All Rights Reserved. Applicable portions of the Terms of Use on tastylive.com apply. Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastylive’s podcasts as necessary to view for personal use. tastylive was previously known as tastytrade, Inc. tastylive is a trademark/servicemark owned by tastylive, Inc.