Software giant Adobe ( ADBE ) reports fiscal fourth-quarter earnings December 13. The company reports after the market close with the consensus calling for earnings of $1.89 per share. ADBE is up 38% on the year.
ADBE was recently trading at $242.41 down $35.20 from its 12-month high and $71.98 above its 12-month low. InvestorsObserver's Stock Score Report gives ADBE an 85 long-term technical score and a 93 short-term technical score. The stock has recent support above $220 and recent resistance below $255. Of the 23 analysts who cover the stock 14 rate it Strong Buy, 1 rate it Buy, 8 rate it Hold, 0 rate it Sell, and 0 rate it Strong Sell, ADBE gets a score of 78 from InvestorsObserver's Stock Score Report.
Adobe has done a great job converting its business to a cloud-based subscription model. The company has grown earnings 45% annually over the last five years and analysts expect additional growth of 33% per annum over the next five years. Adobe has a solid earnings track record with better than expected earnings and revenues in each of the last four quarters. The street expects another beat this quarter with a whisper number of $1.93. During the same period last year the company earned $1.26. Analysts remain upbeat on the stock and maintain an average price target of $290.79, suggesting the stock has an additional 21% upside potential.
Stock Only Trade
If you're looking to establish a long stock position in ADBE consider buying the stock under $242. Sell if it falls below $224 or take profits if it gets to $278.50.
If you want a bullish hedged trade on the stock, consider a 1/18/19 200/205 bull-put credit spread for a $0.40 credit. That's a potential 8.7% return (75% annualized*) and the stock would have to fall 15.6% to cause a problem.
If you want to take a bearish stance on the stock at this time, consider an 1/18/19 285/290 bear-call credit spread for a $0.40 credit. That's a potential 8.7% return (75% annualized*) and the stock would have to rise 17.7% to cause a problem.
Covered Call Trade
If you like the stock but wish to lower your cost basis on a new position, you may want to consider a 1/18/19 $240 covered call. Buy ADBE shares (typically 100 shares, scale as appropriate), while selling the 1/18/19 $240 call for a debit of $228.16, per share. The trade has a target assigned return of 5.2%, and a target annualized return of 45% (for comparison purposes only).