Adobe Stock Ahead of Q4 Earnings Results: Smart Buy or Risky Move?

Adobe ADBE is set to report its fourth-quarter fiscal 2024 results on Dec. 11.For fourth-quarter fiscal 2024, Adobe projects total revenues between $5.50 billion and $5.55 billion. It expects non-GAAP earnings between $4.63 per share and $4.68 per share.The Zacks Consensus Estimate for revenues is pegged at $5.54 billion, suggesting growth of 9.71% from the year-ago quarter’s reported figure.The consensus mark for earnings has been steady at $4.66 per share over the past 30 days, indicating 9.13% growth from the figure reported in the year-ago quarter. Adobe Inc. Price and EPS Surprise Adobe Inc. price-eps-surprise | Adobe Inc. Quote ADBE’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average earnings surprise being 2.59%.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.Let’s see how things have shaped up for ADBE shares prior to this announcement:Factors to Note Prior to ADBE’s Q4 EarningsAdobe is riding on the solid momentum in its family of creative, Generative AI (Gen AI) models, namely Firefly. It has been used to generate 13 billion images since March 2023 and is seeing rapid adoption by leading brands and enterprises. Unveiling of the Firefly Image 2 Model, Firefly Vector Model and Firefly Design Model to mark a significant advancement in its creative Gen AI model family, enhancing creative control, image quality and illustrator capabilities, is a major positive.The new Firefly Video model has been a positive. With Firefly innovations and integrations, ADBE has exceeded 12 billion generations since the launch of Firefly. This is marked as an important milestone.Adobe enhanced features of Acrobat AI Assistant to allow customers to ask questions, get insights, and create content from information across groups of PDFs and other document types, including Microsoft MSFT Word, PowerPoint and text files. It also introduced enhanced meeting transcript capabilities in AI Assistant.Adobe’s growing efforts to expand content creation in Adobe Acrobat are noteworthy. It integrated Adobe Firefly image generation into its Edit PDF workflows and optimized AI Assistant in Acrobat to generate content fit for presentations, emails and other forms of communication.Rich Partner Base Bodes Well for ADBEADBE’s partnerships with Microsoft and Alphabet GOOGL are expected to have contributed well to the quarterly performance. The integration of Acrobat PDF technology into Microsoft Edge and Alphabet’s Google Chrome is a major plus. Adobe is experiencing rising free-to-paid conversions on the back of its Acrobat extensions for Microsoft Edge and Google Chrome.A solid portfolio and differentiated approach to AI are attracting an expanding universe of customers across Adobe’s segments.International Business Machines IBM is one of the notable customers leveraging Adobe Firefly. Adobe’s other key customer wins include Johnson & Johnson, Mayo Clinic, Home Depot, Dentsu, TD Bank, Newell Brands, Google, MediaMonks, Meta Platforms, U.S. Navy, PepsiCo, Estee Lauder, Disney, RedBull, Amazon, KPMG, U.S. Treasury Department and Charles Schwab.ADBE’s Revenue Estimates Remain SteadyFor the fourth quarter of fiscal 2024, Adobe expects Digital Media segment revenues between $4.09 billion and $4.12 billion. The Zacks Consensus Estimate for Digital Media segment revenues is pegged at $4.107 billion, suggesting 10.5% year over year.Digital Experience segment revenues are expected in the $1.36-$1.38 billion range. The consensus mark for Digital Experience revenues is pegged at $1.37 billion, indicating 8.5% year-over-year growth.ADBE Shares Lag Sector YTDYear to date (YTD), ADBE shares have declined 7.3%, outperforming the broader Zacks Computer & Technology sector’s return of 32.6% and the Zacks Computer Software industry’s appreciation of 22.9%.Year-to-Date Performance Image Source: Zacks Investment Research The ADBE stock is not so cheap, as the Value Score of F suggests a stretched valuation at this moment.In terms of the forward 12-month Price/Sales ratio, Adobe’s shares are trading at 10.22X, higher than the sector’s 6.35X.P/S Ratio (F12M) Image Source: Zacks Investment Research Adobe Ahead of Q4 Results: Buy or Sell?Adobe’s deepening GenAI focus and innovative GenAI-powered portfolio present a compelling opportunity for investors over the long term. Strong demand for Adobe GenStudio and Firefly services bodes well for Adobe’s prospects. The general availability of Adobe Content Hub further enhances the value of Adobe Experience Manager Assets, which are currently used by most of the Fortune 50, including 8 of the 10 largest media companies, 9 of the 10 largest financial services companies and 8 of the 10 largest retailers.However, growing competitive pressure in the GenAI space is a risk. For fourth-quarter fiscal 2024, Digital Media’s net new ARR is expected to be roughly $550 million, down 3% year over year. This, along with ADBE’s stretched valuation, makes the stock a risky bet.Adobe currently has a Zacks Rank #4 (Sell), suggesting that it may be wise to stay away from the stock ahead of the fiscal fourth-quarter results.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Free Today: Profiting from The Future’s Brightest Energy SourceThe demand for electricity is growing exponentially. At the same time, we’re working to reduce our dependence on fossil fuels like oil and natural gas. Nuclear energy is an ideal replacement.Leaders from the US and 21 other countries recently committed to TRIPLING the world’s nuclear energy capacities. This aggressive transition could mean tremendous profits for nuclear-related stocks – and investors who get in on the action early enough.Our urgent report, Atomic Opportunity: Nuclear Energy's Comeback, explores the key players and technologies driving this opportunity, including 3 standout stocks poised to benefit the most.Download Atomic Opportunity: Nuclear Energy's Comeback free today.Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Microsoft Corporation (MSFT): Free Stock Analysis Report International Business Machines Corporation (IBM): Free Stock Analysis Report Adobe Inc. (ADBE): Free Stock Analysis Report Alphabet Inc. (GOOGL): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks