We recently compiled a list of the 10 Best NASDAQ Stocks To Invest In Right Now. In this article, we are going to take a look at where Adobe Inc. (NASDAQ:ADBE) stands against the other NASDAQ stocks.
This year has been a healthy year for the American stock market, fueled by a strong performance from technology stocks. Several indices capped their best week of the year in early September as stocks rose ahead of the Federal Reserve meeting where the central bank was expected to cut interest rates. NASDAQ has led the charge and registered a 20% growth during the first half.
While the index lists over 3,100 companies from various sectors, the rally has been led by its top seven holdings which account for 52% of the index. All of them being tech stocks. There is a mix of optimism and skepticism among investors on whether NASDAQ will be able to continue its good run over the second half of the year. Historical data over the past decade shows that in most instances, NASDAQ has finished stronger during the back half of the year. There have only been two years between 2014 and 2023 during which NASDAQ’s year-end returns were lower than first-half returns.
However, Fundstrat Global Advisors’ Tom Lee, who is generally bullish on the stock market, told CNBC earlier this month that investors need to be cautious, as stocks could fall 10% during the next eight weeks amid interest rate cuts and the nervousness around the upcoming presidential elections. The co-founder of the research firm also suggested that if the dip is too strong, it should be viewed as a buying opportunity for investors. Lee has largely been on the money and nailed most stock calls this year.
Other analysts also anticipate market volatility ahead of the presidential elections. Liz Young Thomas, the head of investment strategy at SoFi, while talking to Business Insider noted that stock activity lags between June and August while traders are on vacation. This results in strong market performance aided by thinner trade volumes. The activity jumps up significantly in September when they return to their desks, which often leads to stock price volatility. According to her, a two percent shift in share price in either direction has become the norm in September. However, during election years, the volatility is at its peak in mid-October instead of September, and the market returns to normalcy after the results are announced.
LPL Financial’s Adam Turnquist also expects seasonal shakiness in the months ahead, but pointed out, like Lee did, that the dip presents an opportunity to buy when the share is trading low and earn high returns when the market stabilizes.
Buying the September or October lows has been a very good trade. October, things start to improve, and then you have this November, December, year-end rally, typically very high average returns and high positivity rates for those months.
Both Turnquist and Young Thomas agreed that existing portfolios should not be readjusted because of seasonal volatility because it is short-term and hard to forecast.
With that said, let’s head over to see some of the best NASDAQ stocks to buy right now, given the current trends and future projections.
Methodology
We scanned Insider Monkey’s database of 912 hedge funds for the second quarter of 2024 to look for stocks listed on NASDAQ and picked the top 10 companies with the highest number of hedge funds having stakes in them. We ranked them in ascending order of hedge fund holders in each company.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A team of engineers and scientists collaborating at a workstation surrounded by their applications and solutions.
Adobe Inc. (NASDAQ:ADBE)
Number of Hedge Fund Holders: 107
Adobe Inc. (NASDAQ:ADBE) is an American application software company headquartered in San Jose, California. It offers students and creative professionals various programs and services related to web design tools, digital art, content creation, and other services. It is one of the best NASDAQ stocks to invest in right now, with 107 hedge funds owning stakes in the company at the end of Q2 2024, as of Insider Monkey’s database.
During Q3 2024, it beat analysts’ expectations and reported an EPS of $4.65 compared to forecasts of $4.53 per share. Revenue for the quarter totaled $5.41 billion, representing an 11% increase year-over-year. The results were driven by strong performances across the Digital Media segment, in Creative Cloud, Document Cloud, and Experience Cloud. There has also been a growing number of users of new products and services launched by the company over the last 18 months, such as Adobe GenStudio and Firefly Services, with the latter adopting over 12 billion generations.
The introduction of AI Assistant has been a success as well and has transformed the way people extract value from documents on Adobe Acrobat and Reader. Significant advancements were released in Q3 including the ability for users to comprehend multiple documents in one go. This has translated to an increase in AI Assistant usage, resulting in a 70% surge in AI interactions, quarter-over-quarter. Adobe Inc. (NASDAQ:ADBE) has also secured key customer wins this year, both in the private and public sectors tied to PDF-based collaboration and the Content Credentials offering.
After a robust financial display in Q3, the company has revised its guidance for Q4 and now expects revenue of between $5.50 and $5.55 billion, and earnings per share in the range of $4.63 and $4.68. However, this is weaker than what analysts had forecast for Q4. As a result, Adobe Inc. (NASDAQ:ADBE)’s share price crashed 8% a day after the guidance was released on September 12. Another factor stirring investor concern is that the $550 million guidance for net new Digital Media ARR in Q4 is the lowest on record for the fourth quarter.
Despite a slight dip in share value and some investor concerns about Q4 guidance, most analysts are still bullish on the stock and believe that the company’s outlook for the coming quarter is likely conservative. Street analysts have maintained a consensus Buy rating on the stock with an average price target of $608.28, representing a 19.71% upside from its current trading level.
Overall ADBE ranks 10th our list of the best NASDAQ stocks to invest in right now. While we acknowledge the potential of ADBE as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ADBE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
