Adobe (ADBE) – the company that makes graphic design software – reports earnings Thursday afternoon and I think the stock is at risk. That’s because when times get tough companies cut marketing and advertising budgets and ADBE makes the software that marketing creatives use.
As you can see in the chart above ADBE’s last quarter was met with massive selling – but the stock has bounced back since. ADBE strikes me as expensive at 24x their FY22 EPS guidance when current quarter revenue and EPS growth guidance is only 10% and 9%, respectively. I have taken a very small short position as well as a very small options position in the ADBE $300 Dec16 Puts which can currently be had for just under $2.