Adobe Inc appears to be just the tech stock that can provide shelter in a market storm – a massive, decades-long profitable company with a strong brand and double-digit revenue growth, selling at its lowest valuation in nearly a decade.

Earlier this week, Mizuho Securities and BMO Capital Markets downgraded the stock, on the heels of Oppenheimer’s announcement on Thursday of its largest-ever acquisition of a private software company.

The news sent Adobe shares plunging 17%, their biggest one-day drop since September 2010, wiping $29 billion off their market value.

Adobe, the maker of the Photoshop photo editing software and Acrobat document creation program, has been hampered this year by the US dollar index near a 20-year high and interest rates surging, representing headwinds for overseas sales and stock multiples. The Fed’s hike in interest rates to fight inflation threatens to push the economy into a recession, weighing on demand and causing customers to take longer to sign deals.

It’s a more challenging-than-expected environment for Mizuho, with block trades likely to become less common. Analyst Gregg Moskowitz wrote this week that the company faces the risk of lowering its forecast for the current quarter.

Even before Thursday’s drop, the stock had been struggling this year, down 45%, outpacing the Nasdaq 100’s 27% decline.

Adobe, with a market capitalization of nearly $145 billion, has a long history of shareholder enrichment: Over the past 20 years, the stock has returned 20% annually, about double the return of the S&P 500. Analysts generally see Adobe as a solid company. The growing business is expecting double-digit revenue growth over the next few years.
BMO Capital Markets is less certain in this regard. The company is neutral on the stock, citing “uncertainty about the durability of growth” in its creative cloud business, which includes graphic design and video editing software products. Creative Cloud accounts for more than 60% of Adobe’s 2021 revenue.

The easing of bullish sentiment follows Adobe’s previous report, which downgraded its revenue forecast from mid-June. Following those results, Morgan Stanley downgraded the stock, warning of slower growth.

Still, the weakness in Adobe stock makes it look like a bargain on some metrics. The stock trades at about 20 times forward earnings, the lowest since late 2012 and below the 10-year average of 33 times.

Sarhan sees more volatility ahead for Adobe and other software stocks, but says they’re starting to keep an eye on his radar.