- Adobe is said to be buying Figma for $20 billion.
- The acquisition price is estimated to be around 50 times revenue.
- ADBE sold off 16.8% on the news.
UPDATE: Adobe stock has dropped 4.4% to break the $300 psychological level on Monday. This demonstrates that Thursday's thrashing due to its expensive acquisition of Figma will not be a one-day phenomenon. The sell-off will likely take weeks to play out, but this is more reason to think that ADBE is heading to $260. The tech-heavy Nasdaq has sold off as much as 1.8% at the same time. Much of this negativity in the market is from FedEx warning late Thursday that its delivery volumes began to fall sharply at the end of the most recent quarter. The volumes since have been bad enough that FedEx management withdrew its full-year guidance, and FedEx is viewed as a proxy for the US and global economy. Oppenheimer, Barclays and Bank of America Securities all downgraded Adobe, and Credit Suisse cut its price target from $425 to $350.
By now you have heard the rumors and taken sides. Adobe (ADBE) has agreed to buy private design software maker Figma for $20 billion. Fans point to the ingenuity of Figma's SaaS product. Dectractors point to the pricey price tag. Although Figma's latest internal numbers are non-public, it is estimated that Figma will do about $400 million in 2022 revenue. The estimated acquisition price of $20 billion (some are saying more) amounts to at least 50 times that revenue figure. This makes it one of the most expensive acquisitions ever, at least by that metric.
Adobe promptly sold off on the news on Thursday. ADBE shares lost 16.8% to end the session at $309.13. Now in Friday's premarket, Adobe stock has lost another 2.8% to trade at just $300.40. This is significant, because now ADBE stock has no nearby support in sight. In fact it looks like Adobe is about to drift toward $260.
Adobe stock forecast
With this premarket action, Adobe stock has clearly broken through the only support available to it. That was from the summer of 2019 – July to be exact. There Adobe stock experienced a range high for a three-week period around $311-$313. That resistance will not be turning into support, as they say. The next best region of support is all the way down at $260. $260 and the area just below it worked as support three times in the past three years. First, it happened in June 2019. Then again $260 came to the rescue in October of that year. Only five months later during the main covid capitulation week, ADBE once again traded down to the area just below $260. If I were a betting man, that is where I would expect Adobe to head to next.
ADBE weekly chart
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