Adobe Systems (ADBE)

It's been a tough stock the past year. People have been worried about the adoption of AI and the impact on Adobe, but Firefly has been encouraging and he expects more people will use this product.

It reports Wednesday, the most important of the week. He bets it will break the spell of undeserved negativity.

Is -15% over the year. AI is cannibalizing at lot of their products. He moved out of this.

It lowered its revenue guidance for the year by 1 1/2% but the stock fell by over 20% which was an over-reaction. We should see more progress with opportunities in the enterprise market and Adobe rolling out an express product. The CEO bought $1 million in stock recently.
Buy 33  Hold 12  Sell 2

It's a show-me story: need to see them monetize AI. They have tremendous power to get in front of everyone, though, because everyone uses them.

Their December results beat, but they lowered 2025 guidance by 1.5%. Shares fell 20%, an overreaction. Investors are worried about Adobe's pace of AI progress, but things should improve this year as they create more optimal pricing, including affordable rates for poorer customers. Their express product will compete with Canva. Meanwhile, they're targeting the enterprise market with GenStudio, an AI factory for advertisers. Note: the CEO of Eli Lilly recently bought $1 million of Adobe shares, as he sits on the board.

AI is going to revolutionize the ability to deliver its products in a more dynamic and easier way. But is the company moat going to be as wide? Will we be able to use almost any product to give us what we thought was so special about ADBE? Not top of mind for him right now.

Is worried, but the CEO and product are so good. It generates a lot of cash. Though tough to own at these levels, you can't sell this at 20x PE.

Disappointed earnings overall. He stood aside. Because of the volatility, you can make some pretty good money selling puts and calls on short-dated options.

Likes it. Bit of a Rodney Dangerfield "no respect" complex. Concern that others will eat its AI lunch. Bit pricey at 18.5x for 11.4% EPS growth. Need to own a name like this in the tech space when price reaches these levels. Beat on Q3, guidance for Q4 a bit shy. Earnings are coming up pretty soon. Firefly generative AI showing momentum. 

He'd face the fear and buy at these levels.

Shares have fallen so far that you can but it now. Yes, he may be criticized for saying that now.

It could be a winner or loser. They have an installed user baser, but over 5 years you can't project their cash flow. Their moat is less deep than before It's too complicated to understand.

Sold in late August. Exuberance in AI quickly turned to disappointment in investors' minds. He may not have agreed with that, but you have to face reality, so he made a quick exit. Still a good company, but risks with core business. He'd look elsewhere for new money.

There's something about their management. It has a stable of great products for content creation et al, but they disappoint during earnings; it's how they frame earnings. Their earnings are actually not bad, but they are so conservative that they lower their forecasts. On Dec. 13, they barely beat the top line and were in line the bottom line, but lowered guidance again. Look at Service Now, instead, in SAAS.

Down 25% this year. He continues to be patient and will hold. The disruption story to Adobe's core is overdone. It has incredible profitability, trading at a 30% discount to its 10-year average. They will figure out how to do AI.