Adobe Inc. (ADBE) reported third-quarter earnings yesterday after the market closed, and while earnings and revenue both came in above the analyst consensus, the focus remained on lackluster guidance for the current quarter. Here’s how the company performed in Q3:

  • Adjusted earnings per share: $4.65 compared to the $4.53 consensus.
  • Revenue: $5.41 billion compared to the $5.37 billion consensus.

Some of the 11% revenue growth can be attributed to the company’s Digital Media segment, which includes Creative Cloud subscriptions. Net-new annualized recurring revenue (ARR) climbed 8% to $504 million. Meanwhile, subscription revenue as a whole was up 11% for this quarter.

CEO Shantanu Narayen was more than pleased with the performance in Q3, pointing to the company’s ability to consistently innovate and deliver more and more value to customers. Narayen referenced progress in AI across the business offerings, including Creative Cloud, Document Cloud and Experience Cloud.

You’d think the stock would pop on this news – but unfortunately, it’s down more than 9% so far Friday morning. That’s because Adobe also updated shareholders with its guidance for the current quarter, which fell short of expectations.

The company is anticipating revenue in the range of $5.50 billion and $5.55 billion along with earnings per share between $4.63 and $4.68. Analysts were calling for at least $4.67 in earnings per share on revenue of $5.61 billion. 

ADBE was up more than 9% over the past month leading into this earnings update, but all those gains have been eroded today. The stock is still up more than 16% in the past 3 months, though. So, where does this leave investors?

We’ve taken a look at ADBE through the VectorVest stock software and have 3 things you need to know if you’re currently invested in this stock or awaiting an opportunity to trade it.

ADBE Still Has Very Good Upside Potential and Safety Despite Poor Timing

VectorVest is a proprietary stock rating system designed to save you time and stress while helping you win more trades with less work. You’re given all the insights you need to make calculated, emotionless decisions in 3 simple ratings.

These are relative value (RV), relative safety (RS), and relative timing (RT). Each sits on a scale of 0.00-2.00 with 1.00 being the average. This allows for quick and easy interpretation.

But, you’re also given a clear buy, sell, or hold recommendation for any given stock at any given time based on its overall VST rating. As for ADBE, here’s what we found for you:

  • Very Good Upside Potential: The RV rating compares a stock’s long-term price appreciation potential (forecasted 3 years out), AAA corporate bond rates, and risk. It’s a far superior indicator to the typical comparison of price to value alone. ADBE has a good RV rating of 1.26.
  • Very Good Safety: The RS rating is derived from an analysis of the company’s financial consistency & predictability, debt-to-equity ratio, business longevity, sales volume, price volatility, and other factors. The RS rating of 1.36 is also very good for ADBE.
  • Poor Timing: The RT rating is based on the direction, dynamics, and magnitude of the stock’s price movement. It’s calculated day over day, week over week, quarter over quarter, and year over year. ADBE has a poor RT rating of 0.82 right now after its performance today.

The overall VST rating of 1.15 is still good for ADBE, but the stock is currently rated a HOLD. There’s a bit more to this story that you might be interested in learning, though. So, take a moment to check out this free stock analysis at VectorVest to change the way you trade for the better!

Adobe’s Weak Guidance Overshadows Strong Q3 Results: 3 Other Things Investors Need to Consider

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VectorVest advocates buying safe, undervalued stocks, rising in price. ADBE is down 9% so far Friday after delivering downtrodden guidance for Q4 despite outperforming in Q3. The stock itself has very good upside potential and safety, although poor timing is holding it back right now.

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