How to Trade Adobe's 26% Surge Amid Tech Recovery
The sell-off in the technology sector at the beginning of this year has led to a range of high-quality companies trading at lower price levels.
Adobe – whose products include Adobe Photoshop, Adobe Acrobat and many others – recent earnings report showed high growth and high profitability but was still not immune to the global stock market sell-off and collapsed 40% from its record high.
However, with the stock stabilising at some historically interesting price levels and a potential rebound in the tech sector, high-quality software companies like Adobe now become very interesting.
Learn more about how to trade Adobe below.
|Symbol for Invest.MT5 Account:||ADBE|
|Date of Idea:||1 March 2022|
|Time Line:||1 – 6 months|
|Position Size for Invest.MT5 Account:||Max 5%|
- The Invest.MT5 account allows you to buy real stocks and shares from 15 of the largest stock exchanges in the world.
All trading is high risk and you can lose more than you risk on a trade. Never invest more than you can afford to lose as some trades will lose and some trades will win. Start small to understand your own risk tolerance levels or practice on a demo account first to build your knowledge before investing.
Why Trade Adobe Shares?
There are a variety of reasons why analysts still remain bullish on Adobe’s share price.
Earnings Show High Growth & High Revenue
At the end of 2021, Adobe posted full-year earnings that beat all of its targets. Revenue came in at $15.79 billion against an original target of $15.15 billion and earnings per share came in at $12.48 against an original target of $11.20.
Source: Adobe, 1 March 2022
Growth was seen in Adobe’s core offerings in Creative Cloud which operates the popular Photoshop software and Experience Cloud which operates web analytic products.
- Adobe Creative Cloud achieved 19% year on year growth.
- Adobe Document Cloud achieved 29% year on year growth.
- Adobe Experience Cloud achieved 23% year on year growth.
The company has also achieved generated growth in its operating cash flow consistently year after year since 2018. While there is more competition in some of Adobe’s operating sectors, the company has a loyal base of users who are all using integrated products and are likely to stick with them.
Adobe Plans to Accelerate its Stock Repurchase Program
In the past year, Adobe repurchased $3.87 billion of its own stock. Stock buybacks have been coming in recent years among large corporations as it is a way of returning capital to shareholders.
Essentially, a stock buyback is when a company purchases its own stock on the open market or from shareholders directly. This helps to consolidate ownership of the company, increase equity value and make a company look healthier from a financial perspective.
Adobe is planning to accelerate its pace of repurchases.
Source: Adobe, 1 March 2022
Adobe Stock Forecast - What do the Analysts Say?
According to analysts polled by TipRanks for an Adobe stock forecast in the last 3 months, there are currently 17 buy ratings on Adobe stock. The highest price level for an Adobe stock forecast is $750.00 with the lowest price target at $460.00.
The average price target for an Adobe stock forecast is $657.52 which represents a near 27% upside from current levels.
Source: TipRanks, 1 March 2022
An Example Trading Idea for the Adobe Stock Price
An example trading idea for Adobe’s share price could be as follows:
- Buy the stock on a break above $480.00.
- Target the average analyst price rating of the stock at $657.00.
- Keep your risk small at a maximum of 5% of your total account.
- Time Line = 1 – 6 months.
If you buy 10 Adobe shares:
- If the target is reached = $1,770.00 ($657.00 - $480.00 * 10 shares).
It’s wise to remember that the share price is unlikely to go up in a straight line and it may even go much further down before it rises, especially considering the recent sell-off in global stock markets.
Therefore, be sure to exercise good risk management which is one of the most important aspects of trading successfully. You should always know how much you could potentially lose on a trade and the risks involved.
Another factor to consider is the commission as these can eat into your profits. With the Admirals Invest.MT5 account you can buy US stocks from $0.02 per share. This means buying 10 shares in Adobe stock would result in a commission of $0.20 ($0.02 * 10 shares).
There is a low minimum transaction fee of $1. So, the example trading idea above would result in a commission of just $1 overall!
How to Buy Adobe in 4 Steps
With Admirals, you can buy shares in US stocks like Adobe with a low commission of just $0.02 per share and a low minimum commission of just $1.
- Open an account with Admirals to access the Trader’s Room.
- Click on Trade on one of your live or demo accounts to open the web platform.
- Search for Adobe (ADBE) at the bottom of the Market Watch window and drag the symbol onto the chart.
- Use the one-click trading feature, or right-click and open a trading ticket to input your trade size, stop loss and take profit level.
Source: Admirals MetaTrader 5 Web. Past performance is not a reliable indicator of future results, or future performance.
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Do You See the Adobe Share Price Moving Differently?
Remember that all analytics and trading ideas are based on the personal view and experience of the author.
If you believe there is a higher chance that Adobe’s share price will move lower, then you can also trade short from a CFD (Contracts for Difference) trading account which Admirals also provide.
This means you can trade long and short to potentially profit from rising and falling stock prices. Learn more about CFDs in this How to Trade CFDs article.
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