Should you buy or sell Adobe shares? The stock fell despite posting solid Q3 results
- Adobe shares on Wednesday edged more than 3% lower despite posting solid FQ3 results.
- The company announced its most recent quarterly results Tuesday after markets closed.
- Its revenue and earnings beat consensus Street expectations.
On Wednesday, Adobe Inc. (NASDAQ:ADBE) shares edged lower more than 3% despite announcing better than expected fiscal Q3 results. The company reported its most recent quarterly results on Tuesday after markets closed, beating analyst expectations on revenue and earnings.
The company posted FQ3 non-GAAP earnings per share of $3.11, beating the consensus Street expectation of $3.02. In addition, its GAAP EPS of $2.52, outperforming the average estimate of $2.29, while revenue grew by 22% Y/Y to a record $3.94 billion, $40 million better than the consensus for analyst expectations.
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Adobe also issued stronger-than-expected FQ4 revenue of $4.07 billion compared to the Street forecast of $4.05 billion. Its non-GAAP EPS projection of $3.18 is also better than the consensus estimate of $3.09.
Should you invest in ADBE shares in Q4 2021?
From an investment perspective, Adobe shares trade at a relatively steep P/E ratio of 55.83, making the stock less attractive to value investors. However, analysts expect its earnings per share to grow by more than 80% this year before rising at an average annual rate of about 18.47% over the next five years.
Therefore, the DABE stock could gain the attention of growth investors looking to invest in its rapidly growing creative cloud business.
The company has added more than 38% in market value over the last six months despite dropping by more than 5.5% since last week. Adobe is a market leader in the creative cloud space, a segment of cloud computing that is gaining traction amid the growth of digital marketing.
Can Adobe shares bounce off the trendline support?
Technically, Adobe shares seem to have recently plunged towards the trendline support in the intraday chart. In addition, the stock also appears to have moved closer to the oversold conditions of the 14-day RSI, creating a perfect opportunity for a rebound.
Therefore, investors can target potential rebound profits at approximately $648.26 or higher at $668.72. On the other hand, if the stock continues to pull back, breaking below the trendline, it could find more support at $602.54 or lower at $580.71.
Bottom line: it could be time to buy the ADBE rebound
With Adobe shares falling despite posting solid Q3 results, the stock appears to have moved closer to oversold conditions. Moreover, the ADBE stock also seems to be trading closer to the support trendline, which could trigger a rebound.
Therefore, although the stock seems steeply valued based on its P/E ratio, now could be a good time to buy ahead of its exciting growth prospects.
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