Why This Analyst Turned Bearish on Adobe Stock

ADBE has shed 11.7% in the last six months

Deputy Editor
Jan 5, 2022 at 10:10 AM
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Software name Adobe Inc (NASDAQ:ADBE) is down 3.2% at $536.38 at last check, following a bear note from UBS. The firm downgraded the equity to "neutral" from "buy," citing conversations with more than a dozen IT executive concerning spending plans for 2022. UBS, who also cut its price target to $575 from $635, said marketing spend was pulled forward in 2020 and 2021, which could hinder the company's growth this year. 

There's ample room for more analysts to turn bearish towards ADBE, as 17 of 19 firms in coverage still call the equity a "strong buy." Plus, the 12-month consensus price target of $669.61 is a 25.5% premium to current levels.

Options traders are already responding to this bear note. So far, 5,750 calls and 8,039 puts have crossed the tape, which is double what's typically seen at this point. The two most popular contracts are the weekly 1/7 520-strike put, followed by the February 495 put, with positions being opened at both.

Now could be an ideal opportunity to weigh in on the stock's next move with options. This is per ADBE's Schaeffer's Volatility Index (SVI) of 28%, which stands in the 25th percentile of its 12-month range -- suggesting volatility expectations are unusually low right now. What's more, the stock's Schaeffer's Volatility Scorecard (SVS) sits at 91 out of 100, meaning the equity has exceeded options traders' volatility expectations in the past year.

On the charts, the 160-day moving average caught two significant pullbacks in the latter half of 2021, but Adobe stock has since slipped well below this trendline The equity has been steadily chipping away at its 9.9% year-over-year lead, shedding 11.7% over the last six months.

 

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