Adobe stock price pre-earnings preview: Is it a buy or sell?

The Adobe (NASDAQ: ADBE) stock price has been in a steep freefall in the past few months as the technology sell-off continues. The shares are trading at $371, which is about 47% below its highest point in 2022. Its market cap has retreated to about $186 billion.

Adobe earnings preview

Adobe will become the second big-tech company to publish its quarterly results this week after Oracle. On Monday, Oracle said that its cloud revenue jumped by 19% to $2.9 billion in the fiscal fourth quarter. It also boosted its cloud revenue for the current quarter to 25% helped by the recent acquisition of Cerner Corporation.

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Adobe will publish its results on Thursday this week. Analysts expect the results to show that the company made $4.3 billion in the quarter, an increase from the $4.2 billion that it made in the previous quarter. If analysts are accurate, the results will be higher than the $3.8 billion it made in the same quarter in 2021.

Analysts will focus on the performance of the company’s key segments like digital media and cloud computing. The digital media will be watched closely since expectation is that companies are slashing their marketing budget in a bid to fight inflation. The same is true with the cloud computing business.

Still, Adobe is expected to do do relatively well because of its subscription business model and the fact that most of its products like Photoshop and Illustrator are essential. The same is true with its Document Cloud business, which grew by 17% in the previous quarter.

Another challenge is on currencies. In a recent statement, Microsoft warned that its earnings will be hit by the strong dollar. Still, Adobe is more immune from this since it generates more than 58% of its revenue from the Americas.

Adobe stock price forecast

The daily chart shows that the ADBE stock price has been in a strong bearish trend in the past few months. This month, it managed to move below the important support level at $408, which was the lowest level on 14th May. 

Now, the shares are trading at $371, which was the lowest level this year. It has also crashed below the 25-day and 50-day moving averages. 

Therefore, there is a likelihood that the stock will have a bearish breakout after the earnings. If this happens, the next key support to watch will be at $350.