Tech giant Adobe (NASDAQ: ADBE) reported its fourth-quarter earnings last week where revenue of more than $4.1 billion for the period ending Dec. 3 rose 20% year over year. And for the full fiscal year, its top line was $15.8 billion and grew by 23%.
But, unfortunately, shares of the company crashed from over $630 before earnings day to $556 by the end of the week -- a decline of 12%. That's the lowest the stock has closed in months and it marks a sharp selloff for what's normally a stable tech investment. The reason for the drop is that investors are not impressed with the company's guidance. For the new fiscal year, the company expects revenue to come in at $17.9 billion, which is below analyst expectations of just under $18.2 billion. That projects a full-year growth rate of just 13%, notably lower than what Adobe achieved this past year.
With inflation on the rise and consumers having less purchasing power, it could make it harder to justify spending on the company's software, which can run users more than $20/month just for Adobe Photoshop alone while its Creative Cloud, which includes more applications, costs over $50/month. While Adobe does have a loyal fanbase that has kept sales growing over the years, generating significant growth and building on top of its existing base may prove to be more difficult as spending tightens up.
Adobe trades a forward price-to-earnings multiple of more than 40, which is a high premium for a business that's only growing at a rate of 13%. Investors are better off looking elsewhere for a well-priced tech stock.
