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Adobe SystemsADBEHOLDSep 13, 2024
Stockchase InsightsStock price when the opinion was issued
As of Jun 12, 2026. Market Open.
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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.
He bought more personally, because fears are overblown. Yesterday's earnings and guidance were good, but not enough to put the bear case to bed. He's not happy the CEO is leaving, but is a buy opportunity. Sales growth is over 10% and PE is 11x and free cash of 11% is also growing. They have bought back 10% of shares over two years and will continue. It feels lousy owning it now, but he will do well with this in time.
Jim Lebenthal
Continues to grow revenue (10% on the topline), buying back shares. Trades at very low multiple. Product is well-known and familiar. From its communications, people had high expectations on how AI would change its business, rather than ADBE just incorporating AI and letting that speak for itself. No dividend.
(Analysts’ price target is $402.72)
Paul Harris, CFA
The quarter was good but the outlook was muted. EPS was $4.65, beating estimates of $4.53. Revenue of $5.4B beat estimates by just under 1%. Adobe's guidance for its Digital Media unit's net new annual recurring revenue (ARR) of $550 million was around $11 million below consensus, which is likely due to a strong beat in 3Q, which outperformed Street expectations by $44 million. The 3Q metric was driven by the close of certain transactions that would have otherwise secured in 4Q. There was also a sense a bit of caution in the outlook, given heightened geopolitical uncertainty and lack of clarity on interest rates. The Digital Experience segment is another area where there could be continued pressure until 1H25, as more clarity emerges on enterprise IT budgets. Adjusted operating margin was up only 20 bps to 46.5% -- in line with expectations -- as Adobe ramps up investment in GenStudio and Adobe Express. Not great, but still a great company. HOLD.
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