Adobe (ADBE): Catch the Knife, or Let it Fall?

By Lyndon Seitz, Tech and Stock Writer
December 18, 2024 6:15 PM UTC
Adobe (ADBE): Catch the Knife, or Let it Fall?

If you’re a current investor in Adobe Inc (NASDAQ: ADBE) that just keeps track of the stock ticker and the news, you might be worried a bit right now. It’s been called a falling knife, and with good reason:

That’s a rather sheer cliff.

Why did it drop so sharply? AI, or rather the perception that ADBE’s efforts in the AI market and products were not doing well yet in monetization. So despite other good news recently, there was a selloff resulting in the chart above. Additionally, guidance was softer than what many would hope for.

So, it is now in “falling knife” territory, but does ADBE deserve that

Here’s some food for thought: according to our Zen Ratings system, ADBE holds a rating of B, which means it is among the top 20% of stocks we track. On average, stocks with a Zen Rating of “B” have enjoyed annualized returns of +19.88%, well above the market average. Breaking it down a bit further:

  • It has a Financials rating of A, meaning our rating system has identified a company with extremely strong financials and can cover its debts and liabilities with little concern.
  • It has an above-average Safety Rating of B, meaningIt is a relatively safe company to invest in, while its Value rating of B  suggests it may be a good value at current pricing.
  • It also has an above-average Artificial Intelligence rating of B, meaning our unique AI system has also noticed trends that suggest ADBE will do well in the future.

Analysts agree: 

  • It has a strong forecast, and by analyst’s estimates, ADBE will rise in value significantly in the next year, especially after the current price drop.
  • On average, it has a “Sstrong Bbuy” consensus rating among 15 analysts.
  • Why? Analysts note strong financial performance, that AI offerings (Adobe Firefly) were still in their early stages at the company, and that the guidance for next year was likely a conservative estimate. Record FY 2024 revenue also played a key role in determining analysts’ opinions.

Reasons to Consider ADBE:

  • Whatever the stock price says, ADBE delivered record FY 2024 revenue, has strong financials, and shows strong demand for its products.
  • ADBE is making strong moves in the AI market, though it should be noted that this aspect of its business is in its early stages.
  • The falling price contrasts with strong forecasts. The minimum analyst forecast has the stock rising 13.75% in the next 12 months.

However, ADBE is currently a falling knife, so proceed with caution. 

For ongoing info and context, there is no better tool than WallStreetZen Premium. With it, you will get additional fundamental information, analyst insights, and an unlimited watchlist informing you of major news stories and updates regarding ADBE and any other stock you like. Save time and make more informed decisions? Sounds like a win to us.

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