How to trade Adobe stock as the tech sector recoversJulius Conley 14 / March / 22 Visitors: 90
The massive selling of tech stocks earlier this year has seen a number of high-end stocks trade at fairly low prices.
Adobe's recent earnings report - whose products include Adobe Photoshop, Adobe Acrobat and more - indicates strong growth and strong profitability. But still, massive sales on the global stock market did not pass her by: the company's shares collapsed by 40% from the level of record highs.
However, with the stock price now trading at historically interesting levels and the potential for recovery in the tech sector high, top-notch software companies like Adobe look very attractive to invest in.
Learn more about how to trade Adobe stock in our article.
Why trade Adobe stock?
There are plenty of reasons why analysts remain bullish on Adobe's stock price.
Company activity report points to strong growth and strong earnings
At the end of 2021, Adobe reported an annualized profit that beat its own targets, with revenue of $15.79 billion over its original target of $15.15 billion and earnings per share of $12.48 over its target. at $11.20.
Growth was seen in the core offerings of Adobe Creative Cloud, which runs the popular Photoshop software, and Experience Cloud, which runs web analytics products.
- Adobe Creative Cloud growth of 19% year on year.
- Adobe Document Cloud growth of 29% year on year.
- Adobe Experience Cloud up 23% year on year.
Since 2018, the company's operating cash flow has grown steadily. Despite increased competition in some of Adobe's operating sectors, the company has a loyal user base that uses integrated products and is likely to remain a customer for a long time to come.
Adobe plans to speed up share buyback program
Adobe bought back $3.87 billion worth of its own shares last year. In recent years, large corporations have been buying back their shares in order to return capital to shareholders.
In essence, a share buyback is the purchase by a company of its own shares on the open market or directly from shareholders. This helps to consolidate the ownership of the company, increase the value of equity and make the company healthier financially.
Adobe plans to accelerate the pace of the buyback.
Adobe stock: analyst forecast
According to analysts polled by TipRanks, 17 of them are currently giving buy recommendations to Adobe stock. The highest target in the forecast for Adobe stock is $750.00 and the lowest price target is $460.00.
The average target price for Adobe stock is $657.52, i.e. up nearly 27% from current levels.
Adobe stock trading idea example
An example of an Adobe stock trading idea might be as follows:
- Buy shares when the price rises above the level of 480.00 USD
- Set a target at $657.00
- Keep the level of risk low - no more than 5% of the total account
- Period = 1-6 months
- If you buy 10 Adobe shares:
- If target reached = $1,770.00 profit ($657.00 - $480.00 * 10 shares).
It is important to remember that the price of a stock is unlikely to rise in a straight line; it may even sink much lower before starting to grow.
Therefore, always follow a risk management strategy - one of the most important aspects of successful trading. You should always be aware of how much loss a trade can bring, as well as the risks associated with it.
Another factor to consider is commissions as they can significantly reduce your profits. With an Invest.MT5 account from Admirals, you can buy US stocks with trading fees as low as $0.02 per share. Therefore, the commission for buying 10 Adobe shares will be $0.20 ($0.02 * 10 shares).
The minimum transaction fee is $1. So in the example trade idea above, the total commission would be only $1!
Do you have a different opinion on the Adobe movement?
Remember that analytics and trading ideas are based on the personal opinion and experience of the author.
If you think that the price of Adobe shares is more likely to fall, you can also trade short positions in your trading account thanks to CFD (Contract for Difference).
This means that you can trade both long and short positions, potentially profiting from both rising and falling stock prices.