Adobe Inc. (NASDAQ: ADBE) unveiled its fourth-quarter results for fiscal year 2023 on Wednesday, showcasing an impressive financial performance. The company achieved a historic revenue milestone, reaching $19.41 billion, reflecting a noteworthy 10% year-over-year growth. Notably, earnings per share soared by an impressive 17%, demonstrating the company’s financial strength.
In the fourth quarter alone, adjusted earnings per share experienced a remarkable 18.61% surge, climbing from $3.60 to $4.27. The revenue for this quarter also saw a substantial 11.6% increase, reaching $5.05 billion. The driving force behind this growth was the outstanding performance of its Digital Media segment, which surged by 13% to $3.72 billion. Additionally, the Digital Experience segment showed a commendable improvement of 10%, reaching $1.27 billion.
Despite these achievements, the company experienced a slight setback in after-hours trading, witnessing a close to 6% drop in share prices. This can be attributed to the cautious guidance provided by management for the upcoming quarter and the year ahead. For the first quarter, Adobe anticipates generating revenue between $5.1 billion and $5.15 billion, slightly below the forecast of $5.19 billion. The adjusted EPS for this period is expected to fall between $4.35 and $4.40.
Looking at the full-year outlook, revenue is projected to be in the range of $21.3 billion to $21.50 billion, falling short of the $21.73 billion consensus. The adjusted EPS for the full year is anticipated to be between $17.60 and $18, while forecasts were slightly higher at $18.
Complicating matters, Adobe faces regulatory scrutiny over its subscription models, cooperating with the Federal Trade Commission (FTC) in response to an investigative demand. The demand seeks information on disclosure and subscription cancellation practices, potentially resulting in significant monetary costs that could impact operations materially. Consequently, despite the positive earnings report, investor optimism was tempered.
Technical
On the 1D chart, a rising wedge pattern has emerged, but the after-hours selloff could see the market open below the dynamic support of the wedge. The large selloff could leave a massive gap in the price action, but with optimistic developments in the interest rate environment, there could be an opportunity to narrow the gap in the upcoming sessions.
If the price remains below the resistance at $591.10 in the Thursday session, the share price could look for support at $570.60, close to the 50-SMA (blue line). The Fibonacci midpoint and golden ratio are not far below, at $566.63 and $550.60, respectively, and could provide additional support close to the 100-SMA (orange line).
However, if the price breaches $591.10 in the upcoming session, a retracement is on the cards. Resistance at $613.51 could be a level of interest as the point of initial breakdown at the wedge and could be a challenging level to cross for a sustainable reversal of the after-market selloff.
Summary
Despite an optimistic earnings report on Wednesday, Adobe became the victim of an after-market selloff that saw its share price lose close to 6%, as management’s outlook for the upcoming quarter disappointed investors. However, there could be an opportunity for a retracement in the upcoming session should the share price breach the $591.10 level.
Sources: Koyfin, Tradingview, Adobe Inc.
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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