Adobe (ADBE) stock forecast: Designing the future
Almost everyone who interacts with a computer will at some point in their life have used products from Adobe (ADBE).
The San Diego-based software firm is one of the giants in its field, providing market-leading products ranging from the ubiquitous document reader Acrobat, to image-editing software Photoshop and publishing programs such as InDesign, among others.
While the company has helped many customers, retail and corporate alike, create and organise over the years, the onset of the Covid-19 pandemic has proven its value to investors as well.
With the widespread shift to working from home due to enforced lockdowns across the globe, Adobe stock was among the select names to benefit in the early stages of the pandemic, thanks to software such Adobe Sign, which allows the secure electronic signing of documents. The market has continued to back it to become one of the major beneficiaries of the ‘new normal’ in the workplace.
The stock slumped along with the rest of the market in March 2020 to a low of around $288 a share, but has since surged as high as $699 in November last year.
Adobe has fallen in the early stages of 2022 amid a broader market correction, but continues to trade well above its pre-pandemic pricing levels and currently changes hands for around $477.
The question “is Adobe a good long term investment” seems to attract a broadly positive answer from investors and analysts alike, with a strong market position and brand recognition playing in the firm’s favour.
Yet what is the Adobe stock prediction for 2022 – and will the stock keep its momentum?
ADBE stock analysis
Adobe was one of the standout stock market performers of the pandemic, with the shift to home-working and increased use of digital products and services making the company a market darling throughout 2020 and into 2021.
At its nadir at the beginning of the pandemic the shares sank to below $300. Yet as the broader market rallied and firms enabling remote working particularly benefiting, shares rose as high as $506.92 by the final trading day of 2020.
The stock continued its upward trend throughout 2021, hitting highs of $699.50 in November, before beginning to slump at the start of this year.
The fortunes of the broader market and tech stocks, in particular, have reversed at the start of this year amid the spectre of inflation and rising interest rates, forcing a rethink of valuations. Adobe also fell, dropping on the first trading days of 2022 to roughly $497.
While the stock has fluctuated since then, rising to as much as $540.46 in early February, it currently trades at $457.71 as of 18 February.
However, despite the woes early this year, Forrester analyst Nick Barber said in a recent report that the firm remains well positioned to benefit from recent acquisitions and should continue to go from strength to strength.
Record breaking results
Adobe posted record revenues for the full year 2021, with blockbuster performances from individual units in the fourth quarter and another yearly increase from the result posted in 2020.
The company reported revenues of $15.79bn for the full year 2021, representing year-on-year growth of 23%, helped by record revenues of $4.11bn in the fourth quarter, a 20% increase on the result for 2020.
The quarterly result was bolstered by segment revenue of $3.01bn for digital media, a 21% rise on the prior year period, while Creative revenues grew 19% to $2.48bn and Document Cloud Revenue hit $532m, up 29% year on year.
The record results translated to annual operating cash flows of $7.23bn, with GAAP net income of $4.82bn. For the fourth quarter, Adobe had cash flow from operations of a record $2.05bn, with GAAP net income of $1.23bn.
The company repurchased 7.2m shares across the whole of 2021, of which 1.6m were bought back during Q4.
Adobe executive vice-president and CFO Dan Durn said the results showed the company was well positioned to continue to grow in 2022 and beyond.
“Adobe’s financial performance in fiscal 2021 was outstanding, with top-line acceleration resulting in more than $7bn in operating cash flows,” said Durn.
“With an estimated $205bn addressable market, we are well positioned for significant growth in the years ahead with our industry-leading products and platforms.”
Adobe has also made several acquisitions over the past few years to put that massive cash pile to work.
It acquired cloud-based video-editing platform Frame.io in the third quarter for a price of $1.3bn, and in December 2020 bought work-management platform Workfront in a deal worth $1.5bn, giving its customers access to a single platform integrated with Adobe’s cloud services.
“Workfront’s platform is agile and uniquely architected for enterprise, with extensive integration capabilities that can be easily configured to meet the varied needs of companies of all sizes,” Adobe said in a statement announcing the deal.
“Workfront is equipped with APIs that enable a seamless connection to Adobe Creative Cloud and Adobe Experience Cloud, which have become the global standard for creative workflows and customer experience management.”
Adobe (ADBE) stock forecast
The Adobe stock prediction from Wall Street analysts was positive at the time of writing (18 February), holding a consensus buy rating according to 25 analysts listed by MarketBeat. Adobe stock had 20 buy recommendations, five hold ratings, and zero sell.
The Adobe share price forecast had a consensus price target of $674.96, which represented a potential upside of 47.46% based on the current price of around $457 per share.
Across the analysts, there was a high Adobe stock price target of $820 from Atlantic Securities which was upgraded to overweight in November, and a low $575 from the Royal Bank of Canada.
Note that analysts’ price targets can be wrong. Forecasts shouldn’t be used as a substitute for your own research. Always conduct due diligence before trading or investing, and never trade or invest money you cannot afford to lose.
Onwards and upwards?
Despite a challenging start to 2022 along with most of the rest of the stockmarket, Adobe may remain well positioned to continue its stellar performance of the past few years.
Is Adobe a good investment to 2025, 2030 and beyond?
With the world firmly transitioning to an ever more digital economy, and more work taking place remotely and across geographies, the firm supplying the tools for that revolution looks set to remain a strong growth story in the years to come.
Yet note that investing involves risk. Your decision whether to buy, sell or hold Adobe stock should depend on your attitude to risk, your expertise in the market, the spread of your portfolio and how comfortable you feel about losing money.
FAQs
Is Adobe a good stock to buy?
The Adobe stock prediction from Wall Street analysts was positive at the time of writing (18 February), holding a consensus buy rating according to 25 analysts listed by MarketBeat, with 20 buy recommendations and five hold ratings.
Note that analysts’ price targets can be wrong. Forecasts shouldn’t be used as a substitute for your own research. Always conduct due diligence before trading or investing, and never trade or invest money you cannot afford to lose.
Will Adobe stock go up or down?
Adobe shares had a consensus 12-month price target of $674.96 as of 18 February according to MarketBeat, representing a 41.29% potential upside on current prices. The price targets ranged from a high of $820 to a low of $575.
Note that analysts’ price targets can be wrong. Forecasts shouldn’t be used as a substitute for your own research. Always conduct due diligence before trading or investing, and never trade or invest money you cannot afford to lose.
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