Adobe stock analysis. ADBE stock.
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Adobe has been one of the market’s best stocks since its IPO back in 1986.
Right now, the company has a market cap of 195 billion dollars. With 5.7 billion of cash and investments and 3.6 billion of long term debt the enterprise value is 193 billion.
Revenue over the last 12 months is 18 billion, net income is 4.7 billion and free cash flow is 7.3 billion. So the company is valued at 11 times revenue, 41 times earnings and 26 times free cash flow.
This is an expensive valuation and that’s because Adobe is a consistent performer. The company has grown revenues every year since 2012 and it operates with incredible gross margins of 88%.
Part of Adobe’s success has been a seamless transition to subscription products which now make up 93% of total revenues.
Adobe’s long list of products including Photoshop, Illustrator, Fresco, Premiere Pro, Acrobat and more are all tied to the booming creator economy and these products are perfectly suited to the subscription model.
However, Adobe came under pressure last year following its planned acquisition of Figma for 20 billion dollars. Investors felt the price paid for Figma was way too high. Others said it showed how much competition Adobe is facing.
Upstarts like Figma and Canva and AI tools like MLRunway and Midjourney can do the same things as many Adobe products and in some cases do them better.
However, since that collapse the stock has rebounded and Adobe has announced its own contribution to the AI race.
In a company presentation last week, Adobe unveiled generative tools for Photoshop that wowed users with the ability to quickly enhance and expand images through AI.
This has caused a real buzz and no doubt more AI tools are on the way for all of Adobe’s other products.
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