By Angela Palumbo

Adobe stock has underperformed its peers this year, but Wednesday's earnings can provide shares a much-needed boost.

Adobe is scheduled to report fourth-quarter financials after the stock market closes. Analysts surveyed by FactSet expect the company responsible for apps such as Photoshop and Illustrator to post earnings of $4.67 a share on revenue of $5.54 billion.

In the same period last year, Adobe reported earnings of $4.27 a share on revenue of $5.05 billion.

"While investor sentiment remains negative overall, our checks this quarter were solid, and we expect modest revenue upside along with healthy net new ARR [annual recurring revenue] upside," Mizuho analyst Gregg Moskowitz wrote in a research note Monday.

Moskowitz rates Adobe as Outperform with a $640 price target. He wrote that 2025 guidance will likely be conservative, and he remains confident the company will "significantly monetize its Generative AI innovations going forward."

Investor concerns over gen-AI and competition have hit the stock. Shares have dropped 8.2% this year compared with the 33% increase of the tech-heavy Nasdaq Composite.

Shares also took a hit after Adobe gave disappointing fourth-quarter revenue guidance in September.

The stock's decline is also in stark contrast to the jump in peer software stocks this year. The iShares Expanded Tech-Software Sector ETF has surged 33% this year. Adobe ranks as the 26th worst performer this year in the ETF, according to Dow Jones Market Data.

Investors are celebrating other software companies as they see strong demand for their AI offerings. Salesforce, for example, has jumped 37% this year as Wall Street gets excited over the company's AI agents.

Adobe shared its monetization plans at its MAX conference in October, including charging more for software subscriptions that include AI. It will also have stand-alone AI products. Any more insight on Wednesday could help ease investor concerns.

"We continue to view Adobe as a long-term genAI beneficiary," Stifel analyst J. Parker Lane, who rates the stock as a Buy with a $650 price target, wrote in a research note Tuesday.

He expects the company will maintain steady growth and expand free cash flow, which could help send the stock higher next year.

Shares of Adobe were up 0.5% Wednesday to $549.98.

Write to Angela Palumbo at angela.palumbo@dowjones.com

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December 11, 2024 14:27 ET (19:27 GMT)

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