Opinions
Jim Cramer - Mad Money
Adobe Systems
ADBE-Q
BUY ON WEAKNESS
Sep 18, 2023
Stock price when the opinion was issued
You might be interested:
Still growing topline and bottom line at double digits. Spewing lots of free cash, buying back stock, great balance sheet. Worry is about how will AI affect its business? No evidence yet that it's impacting any of the company's results. Market's not respecting the fundamentals at the moment, maybe rightly so.
She got sick of holding this, because they have trouble with Photoshop--now people can use the tools found in PS elsewhere. She sold before the quarter. Also with Meta, clients can create their own ads using Meta's tools. Adobe hasn't moved fast enough to develop such tools.
He bought more. They beat top and bottom lines, and raised guidance. He's a value investor. Sure, the share price has been terrible, but their earnings estimates are starting to rise and they're buying back share to reduce the share count 5% in the past year. They are meeting the competitive threat through their beats and guidance. They outperform consistently. Eventually, the share price will rise.
Still stands out, but the fear is that it won't in the world of AI. And that's why it looks particularly interesting. Good earnings, upped guidance, yet stock fell. Valuation has collapsed to 17x PE. Still likely to grow double-digit EPS this year, and consensus is still 14-15% EPS growth over the next 3 years.
There is more competition, but it's spending 18% of sales on R&D, so something compelling will turn up. No dividend.
An original cloud king that went profitable a long time ago and is now into AI. Up 58% this year. But after reporting last Thursday, it slid 4% though has partially recovered. Some feel that Adobe's quarter dropped the ball, but he disagrees. They report a modest revenue beat with sales up 10% YOY, with the digital media business better than expected and non-GAAP EPS also beating. There was no problem in the guidance with the earnings outlook robust. Note: a week before the report Adobe announced price increases for subscribers starting Nov. 1 as it develops its Firefly AI. So, share rallied hot before the report. Shares ran up and typically people sell on the news and take profits. Also, Adobe moved its full-year forecast to next December, which spooked some weak-kneed investors. He wanted to hear an update about their Figma buy, but they couldn't yet. Buy this pullback.