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Earnings: Adobe stock sells off, Delta shares rise on raised profit outlook

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Yahoo Finance anchors break down the earnings results for Adobe and Delta Air Lines.

Video Transcript

JULIE HYMAN: The Fed doing largely as expected in terms of describing the rundown of its bond buying program.

[WALL STREET BELLS CLANGING, CHEERING]

Bowlero running the-- ringing the opening bell this morning. We're going to be talking to the CEO a little bit later on-- look at the-- I love that logo, Sozz.

BRIAN SOZZI: Solid.

JULIE HYMAN: Right? It's the-- what do you call that--

BRIAN SOZZI: It's impressive.

JULIE HYMAN: --creature--

BRIAN SOZZI: It looks like a--

JULIE HYMAN: --with the horns?

BRIAN SOZZI: I don't know, is it a moose on a bowling ball? I have no idea. Hey, Julie--

JULIE HYMAN: It's a moose, but there's a-- Oh my gosh, why can't I remember the name of that creature that, that is? I'll look it up. I'll figure it out.

BRIAN SOZZI: Julie, I'm going to top myself. I bowl-- I bowled two 300s. And I'm really proud of it. Looking forward to talking to Tom. Bring him on. Wish he was on now.

JULIE HYMAN: You should be very proud of it. I've never bowled anything close to a 300, so kudos to you, Brian Sozzi.

All right. As we look at stocks as they open up here this morning, we're seeing that continuing rally. The Dow up about a half a as is the S&P 500. The NASDAQ, too, catching another bid this morning. It's up about 4/10 of 1%. So not seeing the strength of the same size that we saw yesterday in reaction to the Fed, but still seeing some strength. We'll see if it has some sustainability throughout the day.

I've also been watching bond yields, Sozz, which have been really interesting as we've gotten the drumbeat to yesterday's announcement. And we just haven't seen them move up that much, 1.46% again, is not what you would expect in what is going to be a rising rate environment. And so that's something that still has remained pretty supportive for stocks.

A lot of people have questioned whether stocks and bond prices can continue to go up together. When the price goes up, the yield goes down remember. For now, that model is intact. We'll see if it breaks going into 2022. I don't know.

BRIAN SOZZI: Yeah, and I'm still--

JULIE HYMAN: All right--

BRIAN SOZZI: --at this--

JULIE HYMAN: Yeah?

BRIAN SOZZI: No, I was just going to say, Julie, I think a lot of folks are still confused to see this bullishness after the Federal Reserve essentially said they're going to hike rates next year. You know, the folks that I've talked to on the "Street" since the Fed meeting, for them, you know, they like that the Fed didn't suggest an even faster pace of interest rate hikes next year. So it doesn't sound like they're going to slam the brakes on this business cycle. And I think that's why you're seeing this market rally continue.

JULIE HYMAN: Maybe so. Maybe so. Well, we'll see if they change-- we could see some evolution, as we have this year, in next year as well. Just because this is the plan right now, doesn't mean this is going to be the plan in March, or in June, or in September. We shall see.

All right, let's take a look at Adobe right now. Because that stock is taking a big hit. It's a big company to be taking a big hit. It's down by 10% right now. And it looks like it has to do with the company's forecast. The forecast for this current quarter sales $4.23 billion. $4.36 billion was the average analyst estimate. And it looks like a profit forecast is also coming in below what analysts had estimated here, Sozz.

So definitely I believe Adobe is up on the year, so this is, you know, coming on the heels of that. But nonetheless, this is a pretty big hit.

BRIAN SOZZI: Well, I want to be clear here, we saw the same type of market reaction when DocuSign reported a couple of weeks ago. And obviously, DocuSign was down 40% in a session. We're not seeing that Adobe.

What I mean here is that these software names that have benefited from the work-from-home environment, the sentiment in the market around these names, they have changed drastically. And you can argue that it started with Salesforce a couple of weeks ago and then continued with the DocuSign reaction about two weeks ago now. And now, we're seeing it with Adobe here.

But there is reason for the selloff. And I know, you know, that a good quarter-- in terms of revenue, up 20%. Most areas of their business up over 20% in revenue. And that's all great. But to your point, Julie it is the guidance. And for the next 12 months, Adobe outlined non-GAAP earnings per share of $13.70. The "Street" was looking at $14.26 here. So the market is not going to take that type of guidance very well in an environment where the sentiment on work-from-home stocks have changed.

JULIE HYMAN: Yeah, it's interesting because we are not seeing all of tech's sort of trade together at this point, right? To your point, there's this differentiation between some of the enterprise stocks, and then there's the FANG stocks. It's like there's FANG and there's everybody else. And some of the FANG stocks have been catching more of a bid and had been holding up better, an Apple for example, than some of these stocks and what we're seeing in the reaction to their numbers.

So let's move on to Delta, which is also out with an update this morning. And it says now it expects to report a profit this quarter. That's new. That's better. And that's because they're seeing a comeback in some of the travel.

Revenue is going to be 74% of the level of 2019. The previous projection was for 70% of the level of 2019. So basically, not back to where they were, but nonetheless, still you know, making some progress toward that point.

BRIAN SOZZI: Yeah, Delta and CEO Ed Bastian really dropping a major flex here in the premarket here ahead of their investor day. Noting, they say, quote, "Meaningful profitability in 2022." That's good, market likes that I'm sure. But also, "A path to improved earnings power beyond prepandemic levels by 2024."

And you scroll down on their release here, and they're looking for almost $7.00 a share in earnings, Julie, for 2024. A little perspective here, according to Yahoo Finance+ data, Delta is supposed to lose $4.58 this year and earn about $3.30 or so next year here. So Delta forecasting really a major ascent in their earnings trajectory over the next few years, provided the pandemic recedes into the background a bit.

JULIE HYMAN: Yeah. And I just want to mention as well that some of the airline CEOs were on Capitol Hill yesterday facing some pretty tough questioning from Congress over the rules-- the COVID-related rules that are now governing the airline industry. We're going to talk more about that later in the program. But it's been a challenge for the industry, obviously. It's been a challenge for the staff on the planes at times as well. We have seen incidents on the planes go higher.

All right, we are going to take a quick break.