What Happened?
Shares of creative software giant Adobe (NASDAQ: ADBE) jumped 5.5% in the afternoon session after the stock's momentum improved as the company continued its significant share buyback program. Adobe's share repurchases resulted in a net buyback yield nearing 8%, signaling confidence to investors. The positive investor reaction came as Barclays maintains an "Overweight" rating. The move also occurred ahead of the company's fourth-quarter results, for which analysts forecasted growth in both revenue and earnings per share.
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What Is The Market Telling Us
Adobe’s shares are not very volatile and have only had 5 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The previous big move we wrote about was 14 days ago when the stock gained 4.4% on the news that comments from a key Federal Reserve official bolstered hopes for an interest rate cut.
The positive sentiment followed comments from New York Federal Reserve President John Williams, a voting member of the rate-setting Federal Open Market Committee (FOMC), who indicated he sees room for further policy easing. Following his remarks, the probability of a December rate cut surged from 39% to 71%, according to the CME FedWatch Tool, causing Treasury yields to fall. Lower interest rates can be particularly beneficial for growth-oriented sectors like software, as they increase the present value of future earnings. This renewed hope provided a boost to the sector, which had recently faced pressure from concerns over high valuations in artificial intelligence.
Adobe is down 21.2% since the beginning of the year, and at $347.63 per share, it is trading 37.1% below its 52-week high of $552.96 from December 2024. Investors who bought $1,000 worth of Adobe’s shares 5 years ago would now be looking at an investment worth $706.19.
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