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Why Adobe Stock Dropped Today

By Rich Smith – Jan 5, 2022 at 12:32PM

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UBS warns that 2022 sales got sucked into 2020 and 2021 -- and won't reappear this year.

What happened

And the tech stock sell-off just goes on and on! On Wednesday, for the fourth trading session in a row, shares of software star Adobe (ADBE 0.91%) suffered yet another slump. Down 4.3% as of 11:40 a.m. ET, Adobe stock has now fallen 7% since the downturn began.

And today, you have someone to blame for it: UBS.

Falling stock chart superimposed over digital map of the world.

Image source: Getty Images.

So what

In a note out this morning, UBS said it is cutting its rating on Adobe and downgrading the shares to neutral "on 2022 growth concerns," reports

After discussing "their 2022 Adobe spending outlook" with 14 of the software company's "large enterprise IT executives and services partners," UBS pronounced itself "disappointed" with the company's growth metrics over the past couple quarters. Worse, UBS worries that "front-office/marketing tech spend" got "pulled-forward in 2020/2021." This artificially inflated Adobe's results in those years by borrowing from growth that would otherwise have happened in 2022.

UBS' conclusion: Adobe's growth rate this year is going to take a hit, "impacting Digital Experience revs," warns the analyst.

Now what

And now here's the really bad news: The damage to Adobe's 2022 sales will be worse "than most investors think." If UBS is right about that, of course, then it means Adobe will probably not hit analyst projections for $13.79 per share in earnings this year -- or nearly $18 billion in sales, either.

Long story short, what UBS is predicting here is an earnings miss for Adobe in 2022. Investors today are trying to dodge that bullet before it is fired, and get out of Adobe stock before it has a chance to disappoint them.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Adobe Inc. The Motley Fool has a disclosure policy.

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