It appeared that after Wednesday's announcement from the Federal Reserve, investors might have gotten over their concerns about inflation and its potential impact on growth stocks. Instead, market volatility returned to Wall Street on Thursday, and it hit the Nasdaq Composite (^IXIC +2.02%) especially hard. As of 12:30 p.m. ET, the Nasdaq was down 286 points, or nearly 2%.
Nasdaq investors can blame earnings in part for the decline, as top-10 Nasdaq stock Adobe (ADBE 2.12%) reported disappointing results that sent the shares down sharply. Yet there's another stock that could potentially have an even bigger impact on the Nasdaq and the stock market after the closing bell on Thursday. Below, we'll look more at Adobe's results and then turn to this key Nasdaq innovator and its prospects.
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Adobe can't paint a pretty picture
Adobe saw big declines on Thursday, falling more than 11% in early afternoon trading. The creative software company reported record results in its fiscal fourth quarter, but its outlook for the future left many shareholders wanting more.
Adobe's numbers were mixed. Revenue for the quarter was up 20% year over year, setting a new record. Net income was down due largely to a one-time tax benefit in the previous year's period, but adjusted earnings of $3.20 per share were 14% higher. That closed a year of 23% sales growth for Adobe, with the bottom line rising nearly 24% on an adjusted basis.
However, investors weren't entirely pleased with Adobe's target for fiscal 2022. The company expects to see revenue of $17.9 billion, which would be up just 13% from 2021 levels. Similarly, 2022 adjusted earnings projections of $13.70 per share would be less than 10% higher than what the company brought in over the past year.
Even before this morning's report, there had already been some nervousness about Adobe's results. Despite the positive impacts from digital transformation across the economy, the news serves as a reminder that companies like Adobe need to keep executing well in order to justify their high stock prices.
Driving higher?
Now, investors are turning their attention to the next big earnings report. That happens to be electric vehicle company Rivian Automotive (RIVN 0.82%), which will issue its first financial report as a publicly traded company after the closing bell on Thursday.
To be clear, no one's expecting to see anything in the way of current results from Rivian. The EV company isn't expected to start delivering its pickups and SUVs until early 2022, and so the company will have negligible revenue and huge losses.
The bigger question, though, is whether Rivian can become a credible threat to industry leader Tesla (TSLA +2.40%). Already, the Elon Musk-led company has alleged that Rivian has taken advantage of key documents that former Tesla employees took before joining the newly public EV company. That shows that Tesla is taking Rivian quite seriously. Rivian's partnership with Amazon.com (AMZN +0.53%) is a huge vote of confidence, and investors will want to hear more about the future of that collaboration in the quarterly report.
If Rivian can meet the high expectations of investors, it would show that the market might not be so extended that it can't sustain its current levels. However, if Rivian falls short, it could call into question not just its own share price but the valuations of many other growth stocks as well.
