Can Adobe Stock Snap its Post-Earnings Losing Streak?

Adobe (ADBE) is approaching its fiscal Q3 earnings report, with analysts forecasting $5.17 EPS on $5.9 billion in revenue. Options traders are exhibiting a notable bearish bias, evidenced by a surge in put buying that has pushed the 10-day put/call ratio to the 98th percentile, reflecting the stock's history of declining after its last four earnings reports. The options market is pricing in a substantial 14.8% price swing post-earnings, as ADBE struggles technically near a two-year low and carries a 21.3% year-to-date deficit.

Analysis

Adobe (ADBE) is approaching its fiscal third-quarter earnings with Wall Street forecasting an 11.2% year-over-year increase in EPS to $5.17 and a 9.0% rise in revenue to $5.9 billion. Despite these positive growth expectations, investor sentiment and positioning are distinctly bearish. This is evidenced by a significant increase in put buying, which has driven the 10-day put/call ratio to an extreme high of 0.98, placing it in the 98th percentile of its annual range. This negative outlook is likely informed by the stock's poor historical performance post-earnings, having declined after its last four reports. The options market is pricing in a substantial 14.8% price swing following the announcement, a level of volatility notably higher than the 10% average move seen over the last eight quarters. Compounding the bearish sentiment is the stock's weak technical posture; it is down 21.3% year-to-date, struggling to rebound from a two-year low of $330.04 and facing technical resistance at the $363 level and its 60-day moving average.

Key Decisions for Investors

• Given the extremely bearish options positioning and a history of post-earnings declines, investors holding long positions should consider hedging their exposure, as the market is heavily anticipating a negative reaction.
• Traders should note the elevated implied volatility of 14.8%, which makes buying options expensive, but the directional skew towards puts suggests bearish strategies could be in focus if the negative trend continues.
• Contrarian investors may see the 98th percentile put/call ratio and weak price action as a potential setup for a sharp rally or short squeeze if Adobe delivers a significant earnings beat and provides strong forward guidance, similar to the 14.5% pop in June 2024.