Waiting for a pullback on this high-flying stock could end up costing you.
Companies at the forefront of artificial intelligence innovations can see rapid swings in their share prices. Stocks can zoom higher on strong earnings, and that momentum can carry the stock for weeks or months. It’s extremely tempting to wait for a pullback in the share price when that happens, but waiting could cost you.
One recent example of an AI stock that’s soared higher in a short period of time is Adobe (ADBE -1.05%). Shares trade 27% higher than they did at the start of June thanks to a strong earnings report, a good outlook from management, and the continued rise in the overall stock market. But even after these latest gains, investors should still consider adding the stock to their portfolios.
The AI-powered future at Adobe
Adobe shares started climbing after a strong fiscal second-quarter earnings report last month. Revenue climbed 10% year over year, and adjusted earnings per share (EPS) was up 15%, ahead of analysts’ expectations. What’s more, management expects to generate between $4.50 and $4.55 per share in the current quarter, also ahead of expectations.
The latest report also put to rest investors’ fears over slowing average recurring revenue (ARR) growth. First-quarter ARR growth disappointed, and management’s guidance for just $440 million in net new ARR in the second quarter didn’t help. But Adobe beat that outlook and brought in $487 million in new subscription revenue last quarter. Management is guiding for $460 million in ARR for the fiscal third quarter.
That’s a sign Adobe’s AI initiatives are starting to pay off. Its generative AI is called Firefly, and it’s trained on Adobe’s proprietary data set, including Adobe stock images. Firefly features include Generative Fill and Generative Expand in Photoshop, Text to Vector in Illustrator, and Remove Object in Lightroom.
Adobe offers limited use of those features for free across all versions of its software suite. That includes the free-to-use Adobe Express. It’s now seeing tremendous success in both attracting…
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