Creative Cloud Seeks An Edge
Tech stocks have been in a world of pain lately.
We never got the Santa Clause Rally of 2022 and I correctly predicted that.
There is still a boatload of uncertainty as we gaze into the 2023 crystal ball.
I am not sitting here telling everyone to bet the ranch on tech stocks right now because that would be irresponsible.
I will say that highly tactical investors will win out in the race to not get slammed by heightened volatility.
Remember some of the most epic moves take place in a bear market rally in the midst of a big correction.
What does that mean in simple terms?
Discovering great entry points to sell big rallies and buy the capitulating dips.
It’s not as easy as buying the dip and taking a nap anymore, and anybody who got body slammed by 2022 performance understands that.
The good news is that many tech firms are firing staff like it’s going out of fashion.
Wages are the most expensive part of running a tech company and Twitter’s Elon Musk firing 75% of the staff has offered a blueprint for firing everyone but the most essential workers.
The cheerleaders must find work elsewhere.
One cloud stock that does pretty well in not hiring the cheerleaders is Adobe (ADBE).
Adobe's array of applications is a tech mainstay for everyone from global enterprises to freelance designers.
It’s true that last year Adobe's share price suffered amid a larger tech stock sell-off, but there was nobody left unscathed as the macro factors brought the whole sector down.
First, it’s not ideal that Adobe spent $20 billion to buy the software design company Figma.
It’s damn expensive.
ADBE clearly didn’t get much bang for the buck and will need a quarter or two to digest the higher expenses and lack of bottom-line follow-through.
Additionally, Adobe's annual sales growth has been slowing over the past few years, and hawks point to this as a key reason to avoid the stock right now.
Adobe must still be looked at because it expanded revenue at 15% year over year in 2022 which is relatively positive for such a mature tech stock.
It shows that ADBE’s software is incredibly sticky for the end consumer.
ADBE’s 2022 earnings also expanded by 10% year over year in 2022, which I would call a victory as loss-making tech companies went out of business.
ADBE has also issued a sales forecast of 13% in 2023 highlighting its uncanny steady performance no matter how bad inflation is.
Many companies and artists simply cannot forego the usage of ADBE and that will keep ADBE in the mix for tech stocks to buy on the way up.
It’s hard to believe that wider macro factors will be worse in 2023 than in 2022.
Many of the strong balance sheet tech firms are hoping for a reversion to the mean type of share price bump.
I am not touting the beginning of 2023 as the seeds to a golden year of Silicon Valley, but trading nimbly in a strong cloud name like ADBE could represent overperformance if great entry points are located.
To be frank, it’s not as easy to make money in technology stocks as it used to be, but the money is still out there for investors to take.
That’s why it’s my job to guide traders and investors on this fascinating journey in tech stocks, as tech stocks are poised to benefit from fully priced Fed Funds interest rate increases.
Investors need to keep their eye out for ADBE.
