As Adobe Inc. shares fell Friday after the company reported its latest earnings on Thursday, one managing director said the market is overreacting and that it may be a buying opportunity.
Bloomberg News reported that Adobe shares fell the most in six months after issuing sales guidance that fell short of Wall Street estimates and disappointed investors. Total revenue during the quarter is expected to come in as high as US$5.55 billion, below average analyst estimates of $5.6 billion. During early afternoon trading, Adobe shares fell just under 10 per cent.
Alex Zukin, managing director and head of software research at Wolfe Research, said in an interview with BNN Bloomberg Friday that he thinks the selloff is a “knee-jerk reaction” and presents a “buying opportunity” for investors.
“Nothing really changed towards the negative from a fundamentals perspective. I think a lot of the guidance nervousness is more driven by timing of some deals that originally may have been expected to fall in (the fourth quarter), they fell in (the third quarter),” he said.
“So, the beat in Q3 was a little bigger and the guide for Q4 was a little smaller, but it really is no change in the fact that this is probably one of the best ways in our opinion to play the AI theme in the enterprise.”
Zukin also highlighted that he thinks the company is well positioned to execute on building out generative AI functionality into its Creative Cloud products and Document Cloud products.
According to Bloomberg News, digital media net new annual recurring revenue is a closely tracked metric detailing the growth of recurring revenue in the company’s creative software segment. Adobe said Thursday that this metric is expected to come in a $550 million during the fourth quarter, short of average analyst estimates of $561.1 million.