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The Adobe stock faced a major sell-off on Thursday as the company’s projections for the first fiscal quarter of 2022 stood below the analysts’ estimates.
On Thursday, December 16, Adobe Inc (NASDAQ: ADBE) stock plunged a staggering 10% in one of its worst performances in 21 months. The company announced its revenue forecast for the fiscal quarter falling short of analysts’ estimations.
ABDE stock has also faced a hammer blow over the last month. Since the beginning of December, it has been continuously moving sideways correcting 16% a month. This has also put up the stock on the steepest decline in a decade since 2010.
The company said that the revenue for its first fiscal quarter that goes through February 2022 will be $4.23 billion. This will be below the analysts’ predictions of $4.34 billion, as noted by Refinitiv. Furthermore, for the full year, Adobe is expecting sales of $17.9 billion which is also below the average analysts’ estimate of $18.16 billion.
However, in this fourth quarter, Adobe’s revenue surged by 20% to $4.11 billion beating Street estimates. The revenue surge came on the backdrop of a 21% growth in the company’s digital media segment. After Adobe’s fourth-quarter earnings report, analysts from Atlantic Equities wrote:
“We believe the shares will be weak today as concerns about a slowing spending environment and conservative guidance proved to be correct”.
The firm though holds a buy rating on the stock stating that the outlook reflects a “muted spending environment observed across the sector”. However, JPMorgan has reduced its rating on Adobe to neutral from buy. On Thursday, the ADBE stock dropped by $64 ending the trading at $566.
The Macro Scenario of the US
The Fed commentary earlier this week on Wednesday provided some boost to the market. However, investors are now focusing on the concerns surrounding the interest rates.
this has forced them to pull out of high growth, high multiple stocks while moving money into sectors more resistant to inflationary pressures and rate hikes. Although the S&P 500 remains flattish on a one-month chart, the WisdomTree Cloud Computing ETF, a basket of cloud software names, tanks by 22%.
In response to the inflation, the Fed has already hinted at aggressive moves in the coming year. There will be possible three interest rate hikes starting from March 2022. Furthermore, starting from January, the US central bank will also halve its monthly bond purchases.