Adobe (NASDAQ:ADBE) is set to report its earnings on Thursday, March 13, 2025. Investors are expected to closely monitor the company’s AI advancements, which has been less than impressive thus far. Analysts predict earnings of $4.97 per share and sales of $5.66 billion, representing year-over-year growth of 11% and 9%, respectively.
The company has $198 Bil in current market capitalization. Revenue over the last twelve months was $22 Bil, and it was operationally profitable with $7.7 Bil in operating profits and net income of $5.6 Bil. While a lot will depend on how results stack up against consensus and expectations, understanding historical patterns might just turn the odds in your favor if you are an event-driven trader. There are two ways to do that: understand the historical odds and position yourself prior to the earnings release, or look at the correlation between immediate and medium-term returns post earnings and position yourself accordingly after the earnings are released. For those seeking growth with reduced single-stock volatility, the High-Quality portfolio presents an alternative, having outperformed the S&P 500 and generated returns exceeding 91% since its inception. Separately, check out our analysis on AVGO Stock To $100?
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Adobe’s Historical Odds Of Positive Post-Earnings Return
Some observations on one-day (1D) post earnings returns:
- In the past 5 years, 20 earnings data points recorded, with 7 positive and 13 negative one-day (1D) returns observed. In summary, positive 1D returns seen about 35% of the times.
- However, this percentage has decreased to 33% if we consider last 3 year data instead of 5.
- Median of the 7 positive returns = 4.9%, and median of the 13 negative returns =-6.3%
Additional data for observed 5-Day (5D), and 21-Day (21D) returns post earnings are summarized along with the statistics in the table below.
Correlation Between 1D, 5D, and 21D Historical Returns
A relatively less risky strategy (though not useful if correlation is low) is to understand the correlation between short-term and medium-term returns post earnings, find a pair that has highest correlation and execute the appropriate trade. For example, if 1D and 5D show the highest correlation, a trader can position themselves “long” for the next 5 days if 1D post-earnings return is positive. Here is some correlation data based on 5-year and 3-year (more recent) history. Note that the correlation 1D_5D refers to correlation between 1D post-earnings returns and subsequent 5D returns.
Is There Any Correlation With Peer Earnings?
Sometimes, peer performance can have influence on post-earnings stock-reaction. In fact, the pricing-in might begin before the earnings are announced. Here is some historical data on past post-earnings performance of Adobe stock compared with stock performance of peers that reported earnings just prior to Adobe. For fair comparison, peer stock returns also represent post-earnings one day (1D) return.
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