Adobe Systems world headquarters in downtown San Jose, California
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Comparing the trend in Adobe’s (NASDAQ: ADBE) stock over recent months with its trajectory during and after the Great Recession of 2008, we believe that the stock only offers potential gains of around 10%, and that, too, after fears surrounding the coronavirus outbreak subside. Our conclusion is based on our detailed comparison of Adobe’s performance against the S&P 500 in our interactive dashboard analysis, ’2007-08 vs. 2020 Crisis Comparison: How Did Adobe’s Stock Fare Compared with S&P 500?’
The World Health Organization declared a global health emergency at the end of January in light of the coronavirus spread. Between January 31st and March 30th, Adobe’s stock has lost 14.2% of its value – less than the 21% decline in the S&P 500 over this period.
Adobe’s Stock Has Fallen Because The Situation On The Ground Has Changed:
Adobe’s stock has suffered as states and countries are on lockdown. As industries have halted production and services, the demand for software and web services have also taken a hit with consumers focusing solely on essentials and not discretionary products. We believe Adobe’s Q2 and Q3 results will confirm this reality with a drop in revenues across all the segments. That said, the company is also well poised to benefit from the growing number of people globally who are working from home thanks to its portfolio of software, as well as services aimed at remote collaboration.
In comparison, Adobe’s Stock Fared Much Worse During The 2008 Downturn
We see Adobe’s stock declined from levels of around $44 in October 2007 (the pre-crisis peak) to roughly $17 in March 2009 (as the markets bottomed out) – implying that the stock lost as much as 62% of its value from its approximate pre-crisis peak. This marked a higher drop than the broader S&P, which fell by about 51%.
The sharp decline then meant that Adobe recovered strongly post the 2008 crisis – rising by 120% between March 2009 and January 2010. In comparison, the S&P bounced back by about 48% over the same period.
Adobe’s stock Hasn’t Taken A Hit This Time Around, And That Limits The Upside Potential Going Forward
Keeping in mind the fact that Adobe’s stock has fallen by 14.2% this time as opposed to the 72.6% decline during the 2008 recession, we see a potential rebound of not more than 10% to levels of around $330 once economic conditions begin to show signs of improving. This marks a partial recovery to the $351 level Adobe’s stock was at before the coronavirus outbreak gained global momentum.
That said, the actual recovery and its timing hinge on the broader containment of the coronavirus spread. Our dashboard forecasting US COVID-19 cases with cross-country comparisons analyzes expected recovery time-frames and possible spread of the virus.
Further, our dashboard -28% Coronavirus crash vs. 4 Historic crashes builds a complete macro picture and complements our analyses of Coronavirus impact on its peer like Microsoft and IBM. The complete set of coronavirus impact and timing analyses is available here.