Adobe's (ADBE -1.63%) stock rose slightly on Oct. 19 after the company revealed its guidance for fiscal 2023, which starts in early December. Let's review those new estimates and see if they'll revive its beaten-down shares, which are down more than 50% over the next 12 months from an all-time high of $688.37 last November.

Why did Adobe's stock crash?

Before we review Adobe's outlook, we should look back at the reasons that drove the bulls away. Back in fiscal 2020, Adobe's revenue and adjusted earnings per share (EPS) rose 15% and 28%, respectively. It also confidently repurchased $3 billion in shares throughout the year, and many investors considered it a safe tech stock to own during the pandemic. Adobe was resistant to the pandemic because its core services all locked in users with annual subscriptions. Many of its flagship services -- such as Photoshop, Illustrator, and Premiere Pro -- were also industry standard tools for media and design professionals.

Two designers edit a photo on a PC.

Image source: Getty Images.

In fiscal 2021, Adobe's revenue and adjusted EPS increased 23% and 24%, respectively. That acceleration can be attributed to the post-pandemic recoveries of the digital media and enterprise software markets. Those robust growth rates, along with another $4 billion in buybacks, convinced investors that Adobe's stock deserved to trade at a premium valuation. At its peak last November, Adobe's stock traded at 55 times the adjusted EPS it would generate in fiscal 2021.

But in the first nine months of fiscal 2022, Adobe's revenue growth decelerated significantly as it lapped that post-pandemic recovery, while the intensifying macroeconomic and currency headwinds exacerbated that slowdown. As a result, Adobe now expects its revenue and adjusted EPS to rise just 12% and 9%, respectively, for the full year.

Those numbers weren't disastrous, but they could no longer support its high price-to-earnings ratio. Adobe then stunned investors last month by abruptly announcing that it would buy the design software start-up Figma, which competes against its own Adobe XD service, for $20 billion -- or a staggering 50 times the revenue it's expected to generate this year.

Adobe's premium valuation, slowing growth, and the belief that it overpaid for Figma all caused its stock to tumble as rising interest rates slammed the tech sector. That's why its stock now trades at just 19 times forward earnings.

Does Adobe see brighter days ahead in fiscal 2023?

During its presentation, Adobe reiterated its previous outlook for fiscal 2022. For fiscal 2023, it expects its revenue to rise 9% to 10% after factoring in a four percentage-point impact from currency headwinds, compared to analysts' expectations for 10% growth. It expects its adjusted EPS to increase 11% to 13% for the year, which matches analysts' expectations for 12% growth. None of those estimates factor in its planned acquisition of Figma, which is expected to close sometime next year.

Adobe's core business is still stable, but the currency headwinds are intensifying as the dollar strengthens against most foreign currencies. That pressure will likely persist as long as the Federal Reserve continues to hike interest rates to rein in inflation. Adobe expects those currency headwinds to reduce the digital media segment's ARR (annualized recurring revenue) by roughly $700 million in fiscal 2023, which would represent about 5% of the segment's full-year revenue.

Fiscal 2023 will clearly be another challenging year for Adobe, but CEO Shantanu Narayen -- who drove the evolution of its desktop-based software into cloud-based services over the past decade -- still sees a "massive market opportunity" in the creation of content, apps, and personalized digital experiences which "will drive Adobe's next decade of growth."

Is it the right time to buy Adobe?

Many investors, including myself, bought shares of Adobe a bit too early this year after it retreated from its all-time highs. I'm certainly disappointed by Adobe's year-to-date performance, but I still think it's a high-quality company that is trading at a reasonable valuation. I don't expect Adobe's stock to rally significantly over the next four quarters. But I believe its low valuation will limit its downside potential, while some positive developments -- such as the stabilizing dollar or more clarity regarding Figma's future -- will gradually bring back a few bulls.