- Q4 earnings due after-hours Thursday, 15 Dec
- Growth guidance and $20 billion Figma deal worries
- Adobe shares down 40% in 2022
It could be a tough end to the week for creative software giant Adobe Systems (ADBE:NASDAQ) as investors nervously eye earnings after the market closes on Thursday (15 Dec).
The San Jose, California-based company is projected to report earnings per share of $3.50 on revenue of $4.53 billion when it releases fiscal fourth-quarter numbers to 30 November 2022, according to Investing.com data. That would imply 9% and 11% year-on-year growth respectively.
GUIDANCE & FIGMA NEWS KEY
But it may not be the figures which dictate the share price reaction, that’s more likely to come from two other angles. First, guidance. Analysts have been becoming increasingly concerned about slowing growth, so there is downside risk that Adobe will issue guidance for the next fiscal year that could fall short of expectations amid slowing demand for its wide array of subscription-based digital media and marketing-software tools.
Adobe’s all-important Creative Cloud business is expected to have suffered another sluggish quarter as individuals and enterprises seek out cheaper options offered by some of its competitors, including Alphabet (GOOG:NASDAQ), IBM (IBM:NYSE), Oracle (ORCL:NASDAQ), and in particular, Australian privately-owned start-up Canva.
The other big factor will be if there are any further developments regarding Adobe’s pending $20 billion takeover of cloud-based design platform Figma as investors grow increasingly nervous over the rich price tag of the deal.
GOOD & BAD OF FIGMA DEAL
Adobe’s share price fell 20% (15 Sep), ‘not because of current financial performance and outlook, but principally because of the announced acquisition of Figma for $20 billion in cash and shares, plus additional retention payments to Figma employees,’ said hedge fund L1 Capital in an open letter in Q3.
Figma, founded in 2012, has pioneered the development of software for collaborative product design on the web. While Li Capital admitted the strategic sense of buying Figma’s complementary software suite, the hedge fund called the acquisition a ‘defensive move’.
‘We also believe Adobe was acting defensively, fearing Figma could develop into a strong direct competitor over time. The acquisition price was extremely high, with [Figma’s] annual recurring revenue estimated to be $400 million by the end of 2022.’
Adobe stock has had a tough year, losing 40% since the start of 2022, and there is a sense among analysts that, even at $338.17, things might get worse before they improve.
