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Today in the Market (9/15/2022)

Good Evening. U.S. stocks declined on a volatile day on Thursday as investors focused on business news rather than movements in the major averages.

The S&P 500 and Nasdaq both declined by 1.13% and 1.43%, respectively, while the Dow Jones dropped only 0.56%.

$20 BILLION DEAL

Shares of software company Adobe (ADBE) were down about 17%. Adobe reported sales numbers for the fiscal third quarter that fell short of analyst forecasts. Additionally, it disclosed a deal to buy Figma, a well-known online design platform, for $20 billion in cash and equity. The transaction is anticipated to be completed in 2023.

Even for Adobe, the purchase of Figma represents a sizable investment, and Wall Street typically views sizable transactions with caution. But the price Adobe is paying is likely what worries investors the most.

Let’s get into the numbers first:

  • Revenue: $4.43 billion vs. $4.44 billion expected
  • Earnings Per Share: $3.40 vs. $3.35 expected

Why Figma? For digital products, Adobe intends to introduce collaborative features, especially for casual users. It has had considerable success with its transition to cloud-based subscriptions, where consumers pay a monthly price. Figma complements the current approach by allowing Adobe to put itself in a position to provide more team-based, online tools.

However… The competition between Figma and Adobe XD, which debuted in 2019, is the last issue. For this purchase to seem good to regulators and investors, Adobe will need to delve into its arsenal of image-editing tools.

STILL SOME HOPE!

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After a challenging year for semiconductor stocks, Texas Instruments Inc. (TXN) rewarded investors by approving $15 billion in share repurchases and increasing its quarterly dividend by 8% to $1.24 per share.

Texas Instruments said in a statement that the buyback plans are in addition to the $8.2 billion in previously authorized repurchases that were still available as of the end of June. In the meantime, the larger dividend will be paid on November 15 to stockholders as of October 31.

The chipmaker’s management has remained steadfast in its commitment to using free cash flow to maximize investor returns, (how committed? The latest move marks 19 straight years of dividend increases) luring long-term investors away from the choppy semiconductor market. By investing more money in dividends and share buybacks, other corporations have started to follow their lead.

Also, the business provided a positive outlook for the upcoming quarter, with sales and earnings projections above Wall Street expectations.

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