Dj Adobe Inc. Stock Outperforms Competitors On Strong Trading Day

In the latest market close, Adobe Systems (ADBE) reached $504.48, with a +1.98% movement compared to the previous day. This move outpaced the S&P 500's daily gain of 0.1%. Meanwhile, the Dow gained 0.69%, and the Nasdaq, a tech-heavy index, added 0.06%.

Shares of the software maker witnessed a loss of 0.15% over the previous month, trailing the performance of the Computer and Technology sector with its gain of 4.92% and the S&P 500's gain of 4.37%.

The investment community will be paying close attention to the earnings performance of Adobe Systems in its upcoming release. The company is predicted to post an EPS of $4.66, indicating a 9.13% growth compared to the equivalent quarter last year. Meanwhile, the latest consensus estimate predicts the revenue to be $5.54 billion, indicating a 9.71% increase compared to the same quarter of the previous year.

For the full year, the Zacks Consensus Estimates are projecting earnings of $18.28 per share and revenue of $21.44 billion, which would represent changes of +13.75% and +10.46%, respectively, from the prior year.

Furthermore, it would be beneficial for investors to monitor any recent shifts in analyst projections for Adobe Systems. These recent revisions tend to reflect the evolving nature of short-term business trends. Consequently, upward revisions in estimates express analysts' positivity towards the company's business operations and its ability to generate profits.

Our research suggests that these changes in estimates have a direct relationship with upcoming stock price performance. To capitalize on this, we've crafted the Zacks Rank, a unique model that incorporates these estimate changes and offers a practical rating system.

The Zacks Rank system, spanning from #1 (Strong Buy) to #5 (Strong Sell), boasts an impressive track record of outperformance, audited externally, with #1 ranked stocks yielding an average annual return of +25% since 1988. Over the past month, there's been no change in the Zacks Consensus EPS estimate. At present, Adobe Systems boasts a Zacks Rank of #2 (Buy).

From a valuation perspective, Adobe Systems is currently exchanging hands at a Forward P/E ratio of 27.06. Its industry sports an average Forward P/E of 31.24, so one might conclude that Adobe Systems is trading at a discount comparatively.

It's also important to note that ADBE currently trades at a PEG ratio of 2.07. Comparable to the widely accepted P/E ratio, the PEG ratio also accounts for the company's projected earnings growth. By the end of yesterday's trading, the Computer - Software industry had an average PEG ratio of 2.61.

The Computer - Software industry is part of the Computer and Technology sector. With its current Zacks Industry Rank of 46, this industry ranks in the top 19% of all industries, numbering over 250.

The strength of our individual industry groups is measured by the Zacks Industry Rank, which is calculated based on the average Zacks Rank of the individual stocks within these groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

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Sapiens SPNS shares rallied 5% in the last trading session to close at $38.98. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock's 2.8% gain over the past four weeks.

Sapiens is benefiting from strong growth in its intelligent insurance software platform, which leverages AI and advanced automation to improve insurers capabilities across different properties, casualty, workers compensation and more.

This provider of software and services to the insurance industry is expected to post quarterly earnings of $0.37 per share in its upcoming report, which represents a year-over-year change of +8.8%. Revenues are expected to be $140.34 million, up 7.4% from the year-ago quarter.

Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.

For Sapiens, the consensus EPS estimate for the quarter has remained unchanged over the last 30 days. And a stock's price usually doesn't keep moving higher in the absence of any trend in earnings estimate revisions. So, make sure to keep an eye on SPNS going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank #3 (Hold).

Sapiens belongs to the Zacks Computer - Software industry. Another stock from the same industry, Adobe Systems ADBE, closed the last trading session 3.8% higher at $504.83. Over the past month, ADBE has returned -2%.

For Adobe, the consensus EPS estimate for the upcoming report has remained unchanged over the past month at $4.66. This represents a change of +9.1% from what the company reported a year ago. Adobe currently has a Zacks Rank of #2 (Buy).

Zacks Investment Research

For Immediate Release

Chicago, IL – November 6, 2024 – Zacks Equity Research shares Tenet Healthcare THC as the Bull of the Day and Starbucks SBUX as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Alphabet Inc. GOOGL, Adobe Inc. ADBE and Broadcom Inc. AVGO.

Here is a synopsis of all five stocks:

Bull of the Day:

Tenet Healthcare, a current Zacks Rank #1 (Strong Buy), is a healthcare services company that owns and operates general hospitals and related healthcare facilities for urban and rural communities in numerous states.

The company's earnings outlook has shifted positively across the board, a bullish sign for near-term share movement.

In addition to favorable earnings estimate revisions, the stock resides in the Zacks Medical – Hospital industry, currently ranked in the top 10% of all Zacks industries. Let's take a closer look at how the company currently stacks up.

Tenet Healthcare Raises Guidance

Tenet Healthcare shares have been scorching-hot in 2024, up 115% and even outperforming many of the Mag 7 members. Favorable quarterly results have helped keep shares moving higher all year long, moving higher again following the latest print that revealed an adjusted EBITDA guidance upgrade.

The company's cash-generating abilities also saw a positive boost throughout the latest period, with free cash flow of $1.8 billion nearly 80% higher than the year-ago figure. And to the likes of shareholders, the company continued to aggressively buy back its shares throughout the period, scooping up $124 million worth.

THC has regularly bought its shares back over recent years, helping establish a small floor.

The valuation picture here isn't expensive, with the current 14.1X forward 12-month earnings multiple a few ticks above the 12.2X five-year median but otherwise nowhere near the 18.7X five-year high. And the current PEG ratio works out to 0.7X, reflective of both growth and value. The stock sports a Style Score of 'A' for Value.

Saum Sutaria, CEO, wrapped up the quarterly release with a bullish statement:

'Our businesses continue to produce strong results and generate robust free cash flow with same store revenue growth and profitability well above our expectations due to the focused execution of our strategy and disciplined operations,'

He continued –

'We have furthered our portfolio transformation and are well-positioned to deliver enhanced value to our patients, physician partners, and shareholders.'

Bottom Line

Investors can implement a stellar strategy to find expected winners by taking advantage of the Zacks Rank – one of the most powerful market tools that provides a massive edge.

The top 5% of all stocks receive the highly coveted Zacks Rank #1 (Strong Buy). These stocks should outperform the market more than any other rank.

Tenet Healthcare Corp. would be an excellent stock for investors to consider, as displayed by its Zack Rank #1 (Strong Buy).

Bear of the Day:

Starbucks is a roaster and retailer of specialty coffee globally. Besides its fresh, rich-brewed coffees, the company's offerings include many complimentary food items and a selection of premium teas and other beverages, sold mainly through its retail stores.

Analysts have taken their earnings expectations lower, landing the stock into an unfavorable Zacks Rank #5 (Strong Sell).

Let's take a closer look at how the company currently stacks up.

Starbucks

Starbucks shares have been volatile nearly all year long, up roughly 3% overall and widely underperforming relative to the S&P 500. Quarterly results have been a source of volatility, with a recent CEO swap also causing the same.

For a quick refresher, former Chipotle Mexican Grill CEO Brian Niccol replaced Laxman Narasimhan back in August. Investors remain hopeful that the swap will bring some positivity, particularly after the several-year-long patch of rough price action. Over the last three years, SBUX shares are down -10%.

The company's latest set of quarterly results was a bit rough, with global comparable store sales declining 7% but getting a slight boost from a 2% increase in average ticket. As has been the case, China continues to be a thorn in the side for SBUX, with comparable store sales in China falling 14% alongside an 8% decline in average ticket price.

The China story has been a big deal for obvious reasons – the region accounts for 30% of the company's stores overall. Below is a chart illustrating the company's sales on a quarterly basis.

Nonetheless, fresh CEO Brian Niccol remains positive, stating:

'It is clear we need to fundamentally change our strategy to win back customers. 'Back to Starbucks' is that fundamental change,'

He continued -

'My experience tells me that when we get back to our core identity and consistently deliver a great experience, our customers will come back. We have a clear plan and are moving quickly to return Starbucks to growth.'

Bottom Line

Analysts' negative revisions rolled in following the release of its latest quarterly results, with weak China sales continuing to be a thorn in the company's side.

Starbucks is a Zacks Rank #5 (Strong Sell), indicating that analysts have taken a bearish stance on the company's earnings outlook.

For those seeking strong stocks, a great idea would be to focus on stocks carrying a Zacks Rank #1 (Strong Buy) or a Zacks Rank #2 (Buy). These stocks sport a notably stronger earnings outlook and the potential to deliver explosive gains in the near term.

Additional content:

Buy 3 Tech Stocks with Extensive AI Applications Amid Solid Upside

The astonishing rally in U.S. stocks that started at the beginning of 2023 was predominantly driven by the technology sector. The prime factor was the unprecedented adoption of generative artificial intelligence (AI) technology worldwide.

Lately, a section of market analysts and financial researchers have raised concerns about the potential profitability of massive investments in generative AI by several technology giants. We believe that AI applications will continue to gather pace in the coming years, buoyed by the rapid penetration of digital technologies and the Internet.

At this stage, we recommend three technology behemoths with extensive applications of generative AI. These companies are - Alphabet Inc., Adobe Inc. and Broadcom Inc..

Buy 3 Tech Giants with Extensive AI Applications

These three companies have beaten their respective Zacks Consensus Estimate for both the top and bottom lines in third-quarter 2024. These stocks have solid price upside potential in the short term.

In the long term, these stocks have a higher earnings per share (EPS) growth rate than the broad-market S&P 500 index, which should drive their stock prices in the next 3 to 5 years. Each of these stocks currently carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Alphabet Inc.

A deepening focus on generative AI technology is a major positive for GOOGL in this data-driven world. Google has been well-poised to capitalize on the growing proliferation of generative AI-backed chatbots on the back of Bard, which enables users to collaborate with experimental AI with new features that include image capabilities, coding support and app integration.

Alphabet is riding on strong cloud and search growth. Google Cloud is benefiting from accelerated growth across AI infrastructure, enterprise AI platform Vertex, generative AI (Gen AI) solutions and core Google Cloud Platform products. GOOGL's strong AI portfolio is helping it attract new customers, win larger deals, and deepen product adoption among existing customers.

Alphabet's expanding GenAI capabilities present a potential catalyst for future growth. GOOGL's dominant position in the search engine market is a strong growth driver. Major search updates and the removal of bad ads to enhance the search results continue to boost traffic on GOOGL's search engine.

GOOGL is cashing in on the increasing demand for Large Language Models with its most powerful AI model called Gemini. Google Bard and Search Generative Experience are powered by Gemini Pro to deliver an enhanced user experience. Google Cloud offers Duet AI, which provides pre-packaged AI agents that assist developers in writing, testing, documenting and operating software.

In addition, GOOGL's Vertex AI enables developers to train, tune, augment and deploy applications using generative AI models. These generative AI capabilities are aiding GOOGL in enhancing search results, accelerating Android development, boosting healthcare reach and delivering enhanced cloud experience.

Excellent Price Upside Potential for GOOGL Stock

The average short-term price target of brokerage firms represents an increase of 21.6% from the last closing price of $169.24. The brokerage target price is currently in the range of $170-$235. This indicates a maximum upside of 38.9% and no downside.

Alphabet has an expected revenue and earnings growth rate of 12% and 11.4%, respectively, for 2025. The Zacks Consensus Estimate for next-year earnings has improved 2.8% in the last seven days. GOOGL currently has a long-term (3-5 years) EPS growth rate of 17.6%, higher than the S&P 500's long-term EPS growth rate of 13.1%.

Adobe Inc.

Adobe has extensively implemented AI applications across its flagship products, such as Photoshop, Illustrator, Lightroom, and Premiere. Earlier this year, ADBE introduced generative AI-driven Adobe Firefly. Moreover, Adobe Acrobat and Reader AI Assistant help users summarize documents and answer questions, saving time and helping users accomplish tasks faster.

Using its new AI-driven cloud-based platform, ADBE is also diversifying into digital marketing services, offering data mining services, which help businesses measure page views, purchases and social media sites. Adobe Marketing Cloud enables marketers to deliver personalized web experiences across multiple devices, manage multichannel campaigns and optimize media monetization.

These services help businesses streamline marketing and products for targeted consumer groups, including chief marketing officers, chief revenue officers, advertising agencies, publishing executives and digital marketers.

Adobe is benefiting from strong demand for its creative products. ADBE's Creative Cloud, Document Cloud and Adobe Experience Cloud products are driving top-line growth. The major positives are rising subscription revenues and solid momentum across the mobile apps.

Growth in emerging markets and robust online video creation demand remain tailwinds. Additionally, solid demand for Adobe's commerce offerings and the growing adoption of Acrobat are encouraging. Adobe's strong market position, compelling product lines and continued innovation remain positive.

ADBE has launched Adobe Express, an application for quick editing effects. Leveraging generative AI, this tool is useful for short-form video content like Instagram Reels. Adobe also launched an AI-based Express app for iOS and Android.

Robust Price Upside Potential for ADBE Shares

The average short-term price target of brokerage firms represents an increase of 26.2% from the last closing price of $481.35. The brokerage target price is currently in the range of $440-$703. This indicates a maximum upside of 46% and a maximum downside of 8.6%.

Adobe has an expected revenue and earnings growth rate of 10.9% and 12.4%, respectively, for next year (ending November 2025). The Zacks Consensus Estimate for next-year earnings has improved 0.2% in the last 60 days. ADBE currently has a long-term EPS growth rate of 13.1%, in line with the S&P 500.

Broadcom Inc.

Broadcom is benefiting from strong demand for its networking products. In second-quarter 2024, it witnessed strong demand for custom AI accelerators, AI networking solutions, Ethernet switching, optical lasers, thin dies, PCI Express switches and Network Interface Cards from hyperscale customers. AVGO's solutions are suitable for addressing the needs of an increasing AI workload and the growing need for fast networking in data centers.

The acquisition of VMware has benefited the Infrastructure software solutions of Broadcom. VMware's expanding clientele, which includes the likes of Alphabet and Meta Platforms, is noteworthy. AVGO's strong partner base, including Arista Networks, Dell Technologies, Juniper and Supermicro, has been a key catalyst. AI revenues are now expected to be $12 billion for fiscal 2024.

Solid Price Upside Potential for AVGO Stock

The average short-term price target of brokerage firms represents an increase of 14.9% from the last closing price of $168.55. The brokerage target price is currently in the range of $150-$240. This indicates a maximum upside of 42.4% and a maximum downside of 18.6%.

Broadcom has an expected revenue and earnings growth rate of 16.7% and 27.1%, respectively, for fiscal 2025 (ending October 2025). The Zacks Consensus Estimate for current-year earnings has improved 3.4% in the last 60 days. AVGO currently has a long-term EPS growth rate of 16.4%, higher than the S&P 500's long-term EPS growth rate of 13.1%.

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