Adobe is set to report earnings of $3.5 on revenue of $4.5bn tomorrow. A strong report may create some upside momentum.

Overview

Adobe Inc., formerly known as Adobe Systems Incorporated, is a worldwide American software corporation with its headquarters in San Jose, California and a Delaware company registration. In the past, it has focused on developing and distributing software for a variety of content types, including graphics, photography, illustration, animation, multimedia/video, motion pictures, and print

Financials

Taking a look at Adobe’s 2021 financial year against 2020. In 2021 revenue saw a rise of $2.9bn and gross profit grew by almost $2.8bn. Post-tax and expense, net income was reported at $4.8bn, which was actually a $438m fall compared to the prior year. This was due to higher operating costs. EBITDA rose almost $1.6bn YoY but as the net income fell short, earnings per share came in at $10.10. A $0.84 decline from 2020. Furthermore, looking at the ratio of assets to liabilities, total assets grew by almost $3bn and total liabilities only grew by $1.4bn.  One of the reasons for the bigger growth in assets was an increase in goodwill and intangible assets. Therefore, the total equity of the company rose by $467m to $14.8bn.

Technicals

From a technical outlook, Adobe’s stock is currently trading at around $244.25 a share. Applying the Fibonacci retracement to the chart, resistance sits at $362.94 (50% fib) then at $383.75 (61.8%) then at $409.50 (76.4%). A break above the 76.4% fib could see the price hike towards the key level at $451.12 (100% fib). Although, this would be more likely in the longer term. Towards the downside, support sits at $342.12 (38.2% fib) then at $316.38 (23.6% fib), then a major level at $274.76 (0% fib) A break below the $274.76 price level may see its share price fall towards the $250-$260 price range. Again, this is more likely in the longer term. Looking at the technical indicators, MACD is currently positive and RSI is neutral as it reads 47.

Summary

To summarise, Adobe’s financials are on the positive side with all areas on the rise besides the income after tax and expenses. The primary reason for this was the much bigger operating costs than in the previous year, but if Adobe manages to balance this moving forward, then all-around the business operates with good financial stability. This is highlighted by the ratio of assets to liabilities as equity continues to grow. Based on the technicals, the stock seems to be in an uptrend with key resistance levels above. Additionally, technical indicators suggest a neutral-positive stance.

Note to investors: Adobe is set to release its quarterly earnings tomorrow 15/12/2022. It is expected to report earnings of $3.5 on revenue of $4.53bn. A positive report may create some upside momentum, however, a negative report could really test the support levels.