Why Adobe Stock Crashed 12% After Earnings

Core Insights - Adobe's stock fell 12.4% despite beating earnings expectations for fiscal Q4 2024, with actual earnings of $4.81 per share and sales exceeding $5.6 billion [1][2] - The company reported an 11% year-over-year sales growth, marking fiscal 2024 as a record year, but the reported profit was a non-GAAP figure, with GAAP earnings at $3.79 per share [2][3] - Adobe's quarterly profit increased by 17%, leading to a full-year net income of $12.36 per share, reflecting a 4.6% growth year-over-year [3] Financial Performance - Adobe generated quarterly free cash flow of $2.9 billion, an 85% increase year-over-year, and a total of $7.9 billion in positive free cash flow for fiscal 2024, representing a 14% growth [3] - The company's cash profit was 46% higher than the reported net income of $5.4 billion for fiscal 2024, resulting in a price-to-earnings ratio of 39.3x and a price-to-free cash flow ratio of 26.9 [4] Investment Considerations - The earnings growth was described as anemic, with a P/FCF/growth ratio of 1.9, which is considered high for calling the stock "cheap" [5] - Despite the high valuation metrics, Adobe appears to be a relatively better option compared to other tech stocks in an overpriced market [5]