Adobe shares plummeted 10% on Thursday after the software maker issued a revenue forecast for the fiscal first quarter that fell well shy of analysts' estimates.
The stock suffered its second-worst drop in the past decade, surpassed only by a 15% slide in mid-March of last year, when coronavirus panic rattled the markets. Adobe's three worst days of the year have come in December, pushing the stock down 16% for the month and putting it on pace for its steepest monthly decline since June 2010.
Adobe said revenue in its fiscal first quarter, which goes through Feb. 2022, will be $4.23 billion, trailing analysts' predictions for revenue of $4.34 billion, according to Refinitiv. For the full year, Adobe expects sales of $17.9 billion, which is below analysts' average estimate for revenue of $18.16 billion.
"We believe the shares will be weak today as concerns about a slowing spending environment and conservative guidance proved to be correct," wrote analysts from Atlantic Equities, in a note after Adobe's fourth-quarter earnings report. The firm has a buy rating on the stock and said the outlook likely reflects a "muted spending environment observed across the sector."
In the fourth quarter, Adobe said revenue climbed 20% to $4.11 billion, which beat estimates, led by 21% growth in the company's digital media segment.
However, inflation and concerns about interest rates have led investors to put 2021 behind them and focus more on the coming year. That's drawn them out of high-growth, high-multiple stocks and into sectors that are generally viewed as more resistant to inflationary pressures and rate hikes.
The WisdomTree Cloud Computing exchange-traded fund, a basket of cloud software names, has tumbled 22% in the past month, while the S&P 500 is about flat over that stretch.
The Federal Reserve said Wednesday that aggressive moves are on the horizon in response to inflation. The central bank is halving its monthly bond purchases starting in January and then rate increases are expected to follow. Projections released Wednesday indicate that Fed officials see as many as three rate hikes coming in 2022, with two in the following year and two more in 2024.
On Tuesday, JPMorgan lowered its rating on Adobe to neutral from buy, as part of a wave of downgrades on software companies issued by the firm. JPMorgan analysts said it was a valuation call, but it was enough to drag Adobe shares down 6.6%.
Adobe fell $64.24 to $566.09 at the close. The stock is down 19% from its 52-week high last month.
