ADBE

Markets just got indulged into a renewed scepticism about the proper, or quick enough, speed of monetization for artificial intelligence (AI) features developed by Photoshop creator Adobe. For the previous quarter, Adobe actually sold $5.71 million worth of its services, beating estimates of $5.66 billion. This was a record achievement for the entire existence of Adobe's business, but performed only 1.8% better quarter-on-quarter and 10% higher year-on-year. Consensus earnings were beaten by even a wider margin, as the company earned $5.08 per share, compared with estimates of $4.97 per share and against $4.81 in the previous quarter (+5.6%) and $4.48 in the same period one year ago (+13.4%). However, the crowd, spoiled by the overall AI segment success, is no longer satisfied with these current Adobe growth numbers and is thirsty for more. Recent weeks' pullback in tech stocks played, of course, its role in the negative reaction to the report, which was compounded by Adobe's relatively modest forecast for the rest of the year.

Thus, shares of the company lost almost 5% in the extended trading this Wednesday, March 12, following Adobe's current quarter's revenue projection, set between $5.77 billion and $5.82 billion, even though this clearly continued an uptrend in sales and was basically in line with Wall St analyst pool's numbers, according to data compiled by LSEG. The last wave of the rising market sentiment in Adobe started exactly two months ago, on January 13, when the stock bounced from its 18-month local dips below $404 per share to reach the levels above $465 in mid-February. AThen the growth potential became exhausted, and now it was not restored by the reaffirming statement from Adobe management on its annual revenue forecast as the company is "well positioned to capitalize on the acceleration of the creative economy driven by AI".

Annual "recurring revenue" for Adobe’s "AI and add-on offerings" was $125 million only, as its CFO Dan Durn expects it may double in the next three quarters, which was not enough for the crowd's satisfaction. People want even higher sales numbers instead of eloquence, and are willing to postpone the next wave of Adobe's rally until better times. A return to the major technical support around $400 looks quite possible, as does a slide even somewhat lower for a while. Yet, a move to the average analyst target around $560 promised 27.7% of potential income even before the overnight decline began, and it could give even more to patient investors who are going to wait for lower levels to pick up the stock which is still cheapening. Tough competition from newly born startups is here, but for me, Adobe looks stronger than most newcomers.