Adobe (NASDAQ: ADBE) stock price is in a freefall, and the worst may be yet to come. It has crashed to a low of $487, its lowest level since July 2023. Worse, the stock has crashed by over 23% from its highest point this year, meaning that it has entered a deep bear market.
Death cross pattern is nearingAdobe’s share price is nearing one of the most dreaded patterns in the financial industry. As shown below, the stock is about to form a death cross, which happens when the 200-day and 50-day Exponential Moving Averages (EMA) cross each other.
The death cross has already happened when you use other forms of moving averages. For example, as shown in the chart below, it has formed when considering the Simple Moving Average (SMA).
Other bad things have happened. For example, the stock has already crashed below the 38.2% Fibonacci Retracement level, opening the floodgates for more downside. If this happens, it means that it could move to the 50% retracement point at $455, which is about 7% below the current level.
Momentum indicators also mean that the stock has more downside. For example, the Relative Strength Index (RSI) and the Stochastic Oscillator have all retreated. Therefore, the outlook for the Adobe stock price is extremely bearish for now. It could push it down to $400.
Adobe’s growth is slowingThe main reason why Adobe share price is crashing is that its growth is slowing and competition is rising.
The most recent results showed that Adobe’s revenue came in at $5.18 billion in the first quarter of the year. That was an 11% revenue growth, which is lower than the five-year average of 16%.
Its digital media segment’s revenue came in at $3.82 billion, a 12% annualised increase while the digital experience segment rose to $1.2 billion.
Adobe’s guidance was softer than expected. It expects to make between $5.25 billion and $5.30 billion this year.
The key challenge for Adobe is that its business is facing substantial competition. For example, it is seeing strong competition from Figma, a fast-growing design company. Adobe abandoned its bid for Figma in December because of regulatory concerns.
It is also facing strong competition from Canva, an Australian company now valued at over $20 billion and one that has over 170 million users. In March, Canva bought Affinity, a software company that owns Affinity Design, Photo, and Publisher.
Therefore, while Adobe will still be the market leader in the design industry, the proliferation of these products will dent its growth.
Further, Adobe is also facing competition from artificial intelligence tools like ChatGPT and DreamStudio.
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