Adobe Stock Attracts Pre-Earnings Bear Note

Mizuho downgraded the shares to "neutral"

Deputy Editor
Sep 12, 2022 at 12:52 PM
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Adobe Inc (NASDAQ:ADBE) is getting ready to enter the earnings confessional, where it will report fiscal third-quarter financial results after the close on Thursday, Sept. 15. Shares of the software company tend to shift lower after earnings, with seven of its last eight next-day sessions ending in the negative. ADBE averaged a post-earnings swing of 4.3% in the past two years, regardless of direction, which is nearly half the 8.1% swing the options pits are pricing in this time around. 

Last seen down 1.2% to trade at $390.19, Adobe stock was today hit with a pre-earnings bear note from Mizuho. The brokerage firm downgraded the equity to "neutral" from "buy" and slashed its price objective to $440 from $480, noting a challenging environment for the stock and several indications that sales cycles could be stretching out. 

Mizuho's note is in contrast with current sentiment, as 18 of the 21 currently covering ADBE rated it a "buy" or better, coming into today. What's more, the security's 12-month consensus price target of $458.93 stands at a 17.7% premium to its current levels of trading, indicating space for more downgrades or a round of price-target cuts.

What's more, calls are being favored in the options pits, per ADBE's 10-day call/put volume ratio of 1.08 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) that stands higher than 74% of readings in its 12-month range. Echoing this, the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.73 stands higher than just 16% of readings from the past year, indicating a bias for bullish bets amongst short-term options traders.

ADBE began breaking down shortly after securing an all-time high of $699.54 on Nov. 22 of last year. A breach of the 180-day moving average occurred in mid-December, and the trendline recently rejected a mid-August rally. A more recent resurgence was stymied at the 20-day moving average, putting the stock at a 40.7% year-over-year deficit.

ADBE Chart September 12

 
 

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