Weak Guidance Makes Adobe Surge 10%

On Thursday, Adobe stock tumbled 10% after the software company provided a revenue forecast for the fiscal first quarter that fell far short of analysts’ expectations. According to Refinitiv, sales for the fiscal first quarter would be $4.23 billion, falling short of analysts’ expectations of $4.34 billion. Adobe predicts $17.9 billion in revenue for the whole year, which is lower than the $18.16 billion average estimate among experts.

Adobe sales increased 20% to $4.11 billion in the fourth quarter, beating expectations, thanks to a 21% increase in the company’s digital media division. Inflation and fears about interest rates, on the other hand, have caused investors to look past 2021 and focus on the year ahead. As a result, they’ve moved away from high-growth, high-multiple companies and into sectors that are thought to be more immune to inflationary pressures and rate hikes.

The WisdomTree Cloud Computing exchange-traded fund, which invests in cloud computing companies, has dropped 22% in the last month, while the S&P 500 has remained relatively stable. In reaction to inflation, the Federal Reserve said on Wednesday that it will take forceful measures. Starting in January, the central bank will halve its monthly bond purchases, with rate hikes expected to follow.

According to projections presented on Wednesday, the Federal Reserve expects three rate hikes in 2022, two the following year, and two more in 2024. JPMorgan cut its recommendation on Adobe from buy to neutral on Tuesday, as part of a wave of downgrades on software companies. Analysts at JPMorgan called it a valuation call, but it was enough to send stock down 6.6 percent. At the close, Adobe was down $64.24 to $566.09. The stock has dropped 19% since its 52-week high last month.