Adobe’s (NASDAQ: ADBE) $20 billion Figma acquisition bid crumbled under regulatory scrutiny, throwing the software giant into a new, albeit familiar, landscape. Despite the deal’s demise, Adobe’s stock price edged higher, reflecting investor relief from the overhang of regulatory uncertainty and renewed focus on the company’s core business and AI aspirations.
Wall Street analysts, initially sceptical of the Figma deal, reacted positively to its termination. Many believe Adobe can now channel its resources towards organic growth initiatives, particularly its burgeoning artificial intelligence (AI) offerings like image generator, Firefly. The company’s recent upgrade to a Zacks Rank #2 (Buy) underscores growing confidence in its earnings outlook.
However, challenges remain. Adobe’s guidance post-stronger-than-expected fiscal fourth-quarter results cast a shadow on its near-term growth prospects. Investors are eager to see tangible returns from the company’s AI investments, with some questioning the timeframe for meaningful AI-driven revenue growth.
Technical
Despite the mixed fundamental picture, Adobe’s 1-week technical indicators paint a bullish picture. The stock currently trades above its key moving averages [50-SMA (blue line), 100-SMA (orange line), and 200-SMA (red line)], suggesting underlying buying pressure. The RSI, while trending upwards, sits comfortably below overbought territory, implying room for further upside.
A continued push higher could offer trading opportunities towards the $634.57 resistance level. A break above the initial resistance would likely bring the $670.60 resistance level within the bulls’ reach in the short term.
However, short-term trading opportunities towards the $569.84 support level could arise should the price action fail to sustain a push higher. A break below the initial support could confirm the bearish momentum, likely bringing the $535.61 and $504.58 support levels into play in the short term.
Summary
Adobe’s post-Figma deal landscape presents a mix of opportunities and uncertainties. While the regulatory hurdle is cleared, questions about the company’s near-term growth trajectory and the effectiveness of its AI strategy linger.
Technically, the bulls hold the upper hand, but the proximity to the resistance level and the potential for profit-taking necessitate cautious optimism.
Sources: TradingView, Dow Jones Newswire, Adobe Inc., MT Newswire, Zacks.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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