Opinions Stockchase Insights
Adobe SystemsADBEBUY ON WEAKNESSMay 31, 2024
Stockchase InsightsStock price when the opinion was issued
As of Jul 22, 2026. Market Open.
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The narrative: subscriber growth has stalled and is now reversing, revenues under pressure, margins crushed, business is really struggling. None of that is true.
Every quarter of the last 4 has produced double-digit revenue growth. Adding 10-11k new, paid subscribers every day. Margins holding up nicely. EPS growth has been in the mid-teens for each of the last 4 quarters. Trading 8-9x PE. He's been adding.
Nothing, yet, to suggest that AI is hurting this business (though that might still happen). Investors are just shunning anything that's seen as under potential attack from AI. Nothing wrong with the business, but you wouldn't know it from the share price.
Martin Cobb, ASIP
Software stocks are at risk because of AI. Some software stocks will do OK because they have been beaten down so much. He sold Adobe two years ago because of the AI threat. Adobe is trying to benefit from AI but you can do the same things outside of Adobe. The CEO and CFO are leaving and he doesn't know if their replacements have been found.
His rule of thumb is that if a position goes south by 15%, they have to revisit the whole investment thesis. CEO quit. And if he loses faith, what have you got? Anticipates that, eventually, hardware companies will be looking at the software stocks to broaden their stables.
(Analysts’ price target is $327.00)
Is trading at a very reasonable valuation. Is growing at double digits and buying a lot of shares. It was disappointing that the CEO is stepping down. The stock's valuation was way too high. He's bullish software--AI will unlock many benefits for software. The market has it wrong. But he isn't sure that Adobe is the best in this space. You can take a capital loss here and buy a better company. If you're long term, Adobe will be a tough one, but if you think the future will be the same as the past, then this is a screaming buy.
Exited for clients (still owns personally due to regulatory restrictions, but he'll sell when he can).
His clients took a capital loss on this. Swapped it for CSU. Adobe management is seeing no signs of fallout from AI, so you should do fine here. AI should enhance its business. Not growing as it used to, now only ~10%. Beautiful balance sheet. Attractive valuation.
Still growing, so you could buy more. Or take the capital loss. Each investor has to decide.
Barry SchwartzQuestion is will AI destroy the moat around a lot of these companies? This name is one of them. There are cheaper PDF readers out there, and AI can do a lot of creative work. Likes it here and bought some for a trade, risk/reward pretty compelling.
Contrast that to the IP of MSFT -- the moat's a lot bigger around it, as we're not going to create another widely adopted suite like that of MSFT.
There are better software companies to invest in.The growth rate is decelerating and the sentiment is negative. Sentiment drives stock prices more than fundamentals in today's market. The last few quarters have been pretty good with beats but the stock has sold off. Also Adobe is more of a point solution rather than an enterprise platform.
ADBE’s share price has been under pressure recently due to a combination of AI uncertainty and weak earnings from CRM which affected most SaaS companies. ADBE is trading at a 23.7x Forward P/E, which we think is a very attractive valuation for a high-quality business. We believe if investors are bullish on one name, the proper course of action is to stay the course and ride along with it, as the share price reaction after earnings is highly unpredictable - if the share price goes down and its fundamentals remain unchanged, investors could average into the position.
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