Adobe Systems (ADBE)

They report this week. Was reiterated a buy on Wall Street. Shares are back to last July's levels, slumping because the street feels Adobe isn't communicating its AI plans. Lags peers like CRM. This report and call are crucial.

Is concerned, because it hasn't performed as well as some software peers. It could be breaking below its 200-day moving average. They need their report next week to prevent this.

Is down 10% in the past month and given the after-hours selling of Salesforce which just reported, ADBE will be pulled down too. Likes the company.

Excellent business. Asset light with high return on capital. Valuation is high, so would wait to buy in weakness. Good for long term investors. Strong moat in the business. Good leadership. Business model (subscription based) is excellent. 

ADBE dropped on news that ChatGPT is going to launch a new video AI generator called Sora. The demos are quite impressive, but it is not available tro customers yet. This could threaten ADBE's video editing dominance, but it has its own product and is not going to standstill. Still, it is a threat, and ADBE needs to be proactive in fighting it. Revenue growth is forecast at 10%+ and EPS growth is forecast at 50% this year and 15% next year. The company has just under $4B net cash and generates $7B in free cash flow annually. We would consider its financial strength to be very solid.
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Benefitting from AI applications. Can more efficiently create a superior commercial product than before. Growing well, earnings growth runway is very good. Multiple's crept up a bit, but not a great concern because of the likelihood of rapid runway growth in revenues, earnings, and cashflow. Very strong on the name. No dividend.

Still runway, price target of $672. So many developments going on in AI. Generative AI can produce images from text. Transform a 2D image to high-quality 3D in 5 seconds. Buy in thirds here around $614, $580, and $550. No dividend.

We thought the Figma deal would be good for the company, but investors initially did not like it. At $20B, it 'sounded' big, but represented only about 10% of ADBE's market cap at the time of the first announcement. ADBE market cap has risen about another $90B since the offer, so Figma's significance has declined even more. Still, it is disappointing, and ADBE has to pay Figma a $1B cash break fee, but life will go on. ADBE noted this week it will use the cash earmarked for the deal to go to buybacks and more AI development. We would not let the failed deal change our positive opinion of the company's future. 
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Valuation high, but management team very good. Would recommend buying on weakness. Has excellent product range and franchise value. Tech stack strong. 

Yes. Down today on shy 2024 estimates. Companies are being cautious. One of the leaders in AI applications. Tons of opportunity. Don't buy this afternoon, but if you see the stock down tomorrow morning, he wouldn't get in your way.

Today it reported a clean top and bottom line beat that beat numbers in nearly every segment, but their 2024 full-year forecast came in light. Also, shares were hot leading up to the report, up 85% this year.

One of his favourite companies which has consistently delivered returns. Benefits big from the AI trend. However, shares tend to be volatile right after earnings. They report Wednesday. Last year, Adobe bought Figma, a design company. He disagrees with some, feeling that Figma was worth the price, because Figma's tools are so beloved by users. Regulators are challenging the deal over anti-trust concerns. Could Adobe walk away from the deal?

An analyst meeting next Tuesday. Current weakness is tempting to buy. Is driven by gen AI popularity and e-commerce in the markets. Their AI Firefly product is unmatched by anyone.

Great company. With higher rates, cost of capital to sustain growth will be challenged. You can see the pullback. Don't buy here, but put on your radar. If we get rates higher for longer, names will reprice quite meaningfully. Solid.