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Buy This Tech Stock Before Earnings for Big Long-Term Upside?

Mega-cap technology stocks such as Nvidia, Meta, and Tesla have skyrocketed in 2023 to help drive a huge chunk of the S&P 500’s YTD gains. Meanwhile, Apple stock just hit fresh all-time highs on Monday.

These rallies might leave some investors worried they are ‘too late’ to join the resurgent tech party. Investors may not want to ‘chase’ some of these soaring big-tech names right now.

Thankfully, there are plenty of fantastic large-cap tech stocks still trading way below their records that investors might want to consider buying.

One such tech name is Adobe (ADBE), and investors might want to take a deeper look at the creative software titan ahead of its Q2 FY23 financial release on June 15.

Creativity Created a Stable Growth Engine  

Adobe’s portfolio is full of industry-leading creative software that have become somewhat irreplaceable to companies, schools, studios, and beyond. ADBE’s offerings range from Photoshop and Premiere Pro to Illustrator and Lightroom.

On top of its core design-focused software, Adobe has expanded its more traditional business-related segments beyond PDFs and e-signatures. And Adobe is rolling out artificial intelligence features into Photoshop and more. 

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Zacks Investment Research

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Adobe’s software is used by Hollywood movie makers and other giants of the creative world, highlighting the cutting-edge and best-in-class nature of its portfolio. The company sells its must-have creative software on a subscription basis, with various pricing levels, bundles, and beyond.

The subscription model helped transform ADBE into a shining example of consistency and growth. Adobe posted between 12% to 25% sales growth for eight straight years.

Looking ahead, Zacks estimates call for Adobe’s revenue to climb another 9% in FY23 and 11% higher in FY24 to reach $21.28 billion. Alongside its projected top-line expansion, ADBE’s adjusted earnings are projected to jump by 12% and 13%, respectively.

Wrapping Up with Price and Valuation

ADBE stock has soared nealry 900% in the last 10 years to crush the Zacks Tech sector’s 267%. Adobe’s outperformance looks even better if you zoom out the scope to the past 20 years, with its shares up a whopping 2,600% vs. Tech’s 515%.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Adobe stock then fell victim to the tech selloff of 2022, with it currently trading nearly 40% below its record highs. Investors might feel better about buying ADBE at these levels since it has already rebounded off its lows, with it up around 60% since the end of September.

Plus, the stock has ripped back above both its 200-day and 50-day moving averages recently. And Adobe achieved the golden cross back in mid-March.

Adobe might be a bit overheated in terms of RSI levels. But its valuation levels remain rather attractive based on its own history. Adobe is trading at 33.4X forward 12-month earnings, which marks an 18% discount to its own 10-year median.   

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