Jim Lebenthal Adobe Systems ADBE-Q WATCH Aug 11, 2025

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.

Honestly, nobody knows how this will play out. But for companies like Adobe, the presence of AI has not hurt their recent quarters.

Valuation fairly attractive, low relative to other mega-cap tech names. Chart doesn't speak to a positive buy, lower lows and lower highs. Price is below a falling 200-day MA. Investment community has shown disdain for every announcement on AI.

They report Thursday. Has fallen dramatically out of favour, similar to Salesforce which reported a big earnings surprise, but disappointing guidance. The street feels that software as a service is vulnerable to AI. Adobe has the best product, though. Is it enough to lift the stock?

Earnings are tonight, so who knows what will happen? The narrative is very negative. But it continues to add ~10k subscribers a day to its Photoshop suite. Continues to deliver good, solid topline growth. Trading at half the valuation of 12 months ago, very attractive risk/reward.

Margin of safety is very high with a long-term view. It's investing heavily in its own AI suite of products. Not only Photoshop, but also document cloud business and CRM software.

They made their last quarter, but that was mainly due to them raising their prices. He'd rather see organic growth or new deals like Workday is.