Stockchase Discover Adobe Systems ADBE-Q BUY Jun 06, 2023

A tough call. Many have switched from Adobe to the cheaper Figma. Let the Figma deal come and see what happens; you could get Adobe cheaper.

Not as though they make buggy whips. Lots of different products in everyday activities, such as the PDF option if ChatGPT fails to work. This presence is likely to continue. 

If you own it and it's been painful, you could try the 1x2 call spread discussed earlier in today's show. Or you could look to generate some call premiums by selling some upside calls. On a stock that's been beaten up like this, the option prices are typically high. So if you want to start extracting some premium from that, there's definitely an opportunity to do that.

Value's deteriorated because of low-cost competition. Product prices are too high. Many investors don't think it can monetize on its AI capabilities. Getting into cloud, but can't compete with MSFT, AMZN or GOOG. Figma (a takeover target it failed to acquire, but which had a wildly successful IPO yesterday) can do exactly the same thing at a fraction of the cost. Don't catch a falling knife.

It has surprised earnings for many, many quarters in a row, and have been buying back shares. It isn't news that AI is troubling this stock, but so far it hasn't shown up in the results. The AI impact is overly priced in, seen whenever they report each quarter some outperformance. That said, he's giving this one more earnings season.

Views it the same way as Intel. He feels the investor's pain, but finally got out of the way. Slow on execution with AI, and hopes this will change. Firefly had pretty good fanfare and brought many software components together. Doesn't think AI will eat their lunch because AI is more about single solutions than multiple solutions. Lots of brand loyalty. 

Will still be around in 3 years, but 10 years could be a different story.

He will reserve final judgement until the next earnings report in September. If they show weak results, or good results but the street doesn't care again, then he will sell. But he doubts that. Everyday, we use PDF files. There's competition, but Adobe is doing a good job.

He sold it two years ago, because the valuation was expensive and had questions about their AI transition. Also, them not buying Figma was another factor. He still wouldn't buy it. Software companies are being challenged by AI.

AI has penetrated what Adobe does and has reduced the spend on Adobe products. It's difficult for them. She eventually sold it.

The chart looks terrible. Consumers want the cheapest software, even the apps on smartphones, and this hurts Adobe.

Capital allocation framework and organic growth prospects of AVGO are better than ADBE. 

AVGO is in his dividend growers mandate, with very compelling organic growth. Over coming 3 years, earnings expected to grow 20% and the dividend along with them. Software companies are spending all the $$ in the AI race. Who's getting it? The hardware makers, so chip makers are well positioned. Continues to buy.