It’s been a tough year for tech company Adobe (NASDAQ:ADBE). While other tech stocks have been soaring due to artificial intelligence, the company behind the popular Adobe Photoshop photo-editing software has been struggling, with its value falling more than 20% this year.
But last week, the company reported some encouraging earnings numbers which propelled its shares higher. For the second quarter of fiscal 2024, which ended on May 31, the company beat expectations and it also raised its guidance for the year. Revenue of $5.31 billion came in higher than the $5.29 billion that analysts were expecting. Compared to the previous year, the top line jumped by around 10%. And adjusted earnings per share of $4.48 was also strong and higher than Wall Street’s forecast of $4.39.
Adobe has been rallying since the release of the results as it’s now back above $500. The big test will be whether the rally can continue, as the stock’s 20-day moving average recently dipped below the 50-day moving average, which is a bearish trigger which can result in a deeper sell-off in the days and weeks ahead.
At more than 40 times earnings, Adobe is still an expensive stock to own given its relatively modest growth rate. But the strong results do indicate that perhaps there is still some positive momentum driving more sales growth, which could help turn the stock around.
Investors, however, may want to wait to see how the stock does from here on out before deciding to buy it as it’s still an expensive stock, the results were good but not great, and the rally may prove to be a brief one.
