Adobe (ADBE 3.41%) delivered solid revenue and profit growth in fiscal 2021. Yet the market was disappointed with the cloud-software leader's sales and earnings forecast for the year ahead. Its stock, in turn, plunged.
Should investors pounce on its now-discounted shares? Analysts can't seem to agree.
Evercore ISI analyst Kirk Materne believes Adobe's stock will outperform its peers. Materne sees Adobe's share price rallying to $725, despite the stock's recent struggles. If he's correct, shareholders would enjoy gains of roughly 28% from the stock's current price near $566.
Materne noted that Adobe often issues conservative guidance, which it subsequently surpasses. Thus he expects the software-maker's stock price to rebound after it reports first-quarter earnings results in March, though he cautions that its share price could remain stagnant until then.
Meanwhile, Citigroup analyst Tyler Radke has only a neutral rating on Adobe's stock. However, his $678 share-price forecast implies that the tech stock still has plenty of upside potential.
That said, Radke warned that Adobe is facing several significant challenges. Namely, competition is intensifying in its key digital-media business, and the pandemic-fueled acceleration in its cloud operations could abate as the economy reopens.
Is Adobe's stock a buy?
With inflation fears dragging down many premium-priced growth stocks, Adobe's shares could continue to decline further in the coming days. That could give patient, long-term-minded investors an opportunity to scoop up shares of this cloud leader at a sizable discount to where they were trading just a few weeks ago.
Buying high-quality businesses at bargain prices is typically a wise move -- and that's likely to also be the case with Adobe.