Adobe (NasdaqGS:ADBE) - Share price, News & Analysis

Q: What is the Fair Price of ADBE when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

ADBE ($445.67) is trading below our estimate of [[fair value]] ($622.39)

ADBE fundamental analysis
Snowflake Score
Valuation	5/6
Future Growth	4/6
Past Performance	3/6
Financial Health	5/6
Dividends	0/6

ADBE Stock Overview

Adobe Inc. operates as a diversified software company worldwide.

Rewards

Trading at 28.4% below our estimate of its fair value

Earnings are forecast to grow 16.41% per year

Risk Analysis

ADBE passed our risk checks.

Adobe Competitors

Salesforce

NYSE:CRM

US$188.9b

Intuit

NasdaqGS:INTU

US$137.3b

Synopsys

NasdaqGS:SNPS

US$59.0b

Autodesk

NasdaqGS:ADSK

US$50.6b

Price History & Performance

Summary of all time highs, changes and price drops for Adobe
Historical stock prices
Current Share Price	US$445.67
52 Week High	US$699.54
52 Week Low	US$338.00
Beta	1.11
1 Month Change	19.82%
3 Month Change	9.92%
1 Year Change	-30.07%
3 Year Change	55.04%
5 Year Change	201.19%
Change since IPO	35,113.43%

Recent News & Updates

Aug 03

Adobe: The Essential Investment Thesis

Adobe is a highly diversified software company that lies at the intersection of digitization. This article aims to summarize Adobe's investment thesis as concisely as possible, without leaving out too much information. Knowing if a company is a good fit for your portfolio takes much more than this, but it should serve as a starting point. Introduction I'm sorry I wrote you such a long letter. I didn't have time to write you a short one. Blaise Pascal - 17th Century French mathematician This (often misattributed) quote says something about this article. In our marketplace Best Anchor Stocks, we have 5 elaborate articles in which we explain everything there is to know about Adobe Inc. (ADBE), but this article is a distillation of everything there. We do this for all our holdings for our subscribers.

Jul 22

Returns On Capital Are A Standout For Adobe (NASDAQ:ADBE)

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Ideally, a...

Jul 13

Andvari Associates - Adobe: Outstanding Financial Profile And Copious Free Cash Flows

We also started a new position in a company we have known for decades: Adobe Inc. We believe Adobe has dominant and growing share when it comes to mid-sized and large enterprises. ADBE's total annual revenues will be ~$17.7 billion this year and subscription-based revenues make up 90%+ of that. The following segment was excerpted from this fund letter. ADOBE (ADBE) We added to our positions in other current holdings and we also started a new position in a company we have known for decades: Adobe Inc. Adobe is a software company that has been around for nearly 40 years. We are intimately familiar with the company. Andvari’s own founder and Chief Investment Officer started using Adobe products over 25 years ago. Adobe is also one of several companies featured in an Andvari white paper about business lessons learned from the evolution of the desktop publishing software industry. There are many reasons why Adobe is a high-quality company, but let’s first outline what the company does. The company divides its offerings into two groups: Digital Media and Digital Experience. The Digital Media segment contains the products with which most people are familiar, such as Photoshop for photo editing, Illustrator for digital illustrators, and Acrobat for creation, editing and signing of documents in Adobe’s own ubiquitous PDF file format. Adobe’s Digital Experience segment is the smaller of the two and thus the one with greater potential. Digital Experience offers software applications that enable large enterprises to manage, execute, measure, monetize and optimize customer experiences across different sales channels and different devices. Companies like BMW, Nike, Prada, Verizon and Walgreens are Digital Experience customers. Andvari admires how most of Adobe’s tools in Digital Media have market shares exceeding 90%. The content creation industry has standardized on Adobe products and thus the cost to switch to a competing product is extremely high. Content creators have spent their entire careers using Adobe products. The time to learn the ins and outs of another piece of software, and the loss in productivity that would result in doing so, prohibits the creative professional from switching. On the Digital Experience side, we believe Adobe has dominant and growing share when it comes mid-sized and large enterprises. Switching costs are also high. Adobe has even more attractive attributes. There is little to no customer concentration. This contributes to Adobe’s ability to raise prices and maintain high margins because there is no customer large enough to negotiate significantly on pricing. Next, regulatory risk is decidedly less compared to our former investment in Liberty Broadband. The cable and telecom industry has always faced extraordinary scrutiny from the Federal Communications Commission, Justice Department, and Congress. To our knowledge, no executive at Adobe has been hauled in front of a Congressional committee to be grilled about charging excessive prices for Photoshop.

Shareholder Returns

	ADBE	US Software	US Market
7D	2.8%	-0.9%	1.3%
1Y	-30.1%	-16.6%	-11.7%

Return vs Industry: ADBE underperformed the US Software industry which returned -16.6% over the past year.

Return vs Market: ADBE underperformed the US Market which returned -11.7% over the past year.

Price Volatility

Is ADBE's price volatile compared to industry and market?
ADBE volatility
ADBE Average Weekly Movement	5.5%
Software Industry Average Movement	10.5%
Market Average Movement	7.8%
10% most volatile stocks in US Market	16.9%
10% least volatile stocks in US Market	3.2%

Stable Share Price: ADBE is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 5% a week.

Volatility Over Time: ADBE's weekly volatility (5%) has been stable over the past year.

About the Company

Founded	Employees	CEO	Website
1982	25,988	Shantanu Narayen	https://www.adobe.com

Adobe Inc. operates as a diversified software company worldwide. It operates through three segments: Digital Media, Digital Experience, and Publishing and Advertising. The Digital Media segment offers products, services, and solutions that enable individuals, teams, and enterprises to create, publish, and promote content; and Document Cloud, a unified cloud-based document services platform.

Adobe Fundamentals Summary

How do Adobe's earnings and revenue compare to its market cap?
ADBE fundamental statistics
Market Cap	US$203.53b
Earnings (TTM)	US$4.89b
Revenue (TTM)	US$16.69b

42.7x

P/E Ratio

12.5x

P/S Ratio

Is ADBE overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
ADBE income statement (TTM)
Revenue	US$16.69b
Cost of Revenue	US$2.03b
Gross Profit	US$14.67b
Other Expenses	US$9.78b
Earnings	US$4.89b

Last Reported Earnings

Jun 03, 2022

Next Earnings Date

Sep 15, 2022

Earnings per share (EPS)	10.45
Gross Margin	87.87%
Net Profit Margin	29.29%
Debt/Equity Ratio	29.5%

How did ADBE perform over the long term?

See historical performance and comparison

We’ve recently updated our valuation analysis.

Valuation

Is ADBE undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

5/6

Valuation Score 5/6

Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
Analyst Forecast

Key Valuation Metric

Which metric is best to use when looking at relative valuation for ADBE?

Other financial metrics that can be useful for relative valuation.

The above table shows the n/a ratio for ADBE. This is calculated by dividing ADBE's market cap by their current preferred multiple.
What is ADBE's n/a Ratio?
n/a Ratio	0x
n/a	n/a
Market Cap	US$203.53b

ADBE key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue	12.2x
Enterprise Value/EBITDA	30.5x
PEG Ratio	2.6x

Price to Earnings Ratio vs Peers

How does ADBE's PE Ratio compare to its peers?

ADBE PE Ratio vs Peers

The above table shows the PE ratio for ADBE vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	PE	Estimated Growth	Market Cap
Peer Average	100.1x
CRM Salesforce	188.4x	40.3%	US$188.9b
INTU Intuit	54.9x	23.6%	US$137.3b
SNPS Synopsys	58.5x	14.2%	US$59.0b
ADSK Autodesk	104x	31.1%	US$50.6b
ADBE Adobe	42.7x	16.4%	US$208.6b

Price-To-Earnings vs Peers: ADBE is good value based on its Price-To-Earnings Ratio (42.7x) compared to the peer average (101.4x).

Price to Earnings Ratio vs Industry

How does ADBE's PE Ratio compare vs other companies in the US Software Industry?

Price-To-Earnings vs Industry: ADBE is good value based on its Price-To-Earnings Ratio (42.7x) compared to the US Software industry average (48.5x)

Price to Earnings Ratio vs Fair Ratio

What is ADBE's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

ADBE PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio	42.7x
Fair PE Ratio	44.2x

Price-To-Earnings vs Fair Ratio: ADBE is good value based on its Price-To-Earnings Ratio (42.7x) compared to the estimated Fair Price-To-Earnings Ratio (44.3x).

Share Price vs Fair Value

What is the Fair Price of ADBE when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: ADBE ($445.67) is trading below our estimate of fair value ($622.39)

Significantly Below Fair Value: ADBE is trading below fair value by more than 20%.

Analyst Price Targets

What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?

Analyst Forecast: Target price is less than 20% higher than the current share price.

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Future Growth

How is Adobe forecast to perform in the next 1 to 3 years based on estimates from 28 analysts?

Future Growth Score

4/6

Future Growth Score 4/6

Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE

16.4%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: ADBE's forecast earnings growth (16.4% per year) is above the savings rate (1.9%).

Earnings vs Market: ADBE's earnings (16.4% per year) are forecast to grow faster than the US market (14.4% per year).

High Growth Earnings: ADBE's earnings are forecast to grow, but not significantly.

Revenue vs Market: ADBE's revenue (11.8% per year) is forecast to grow faster than the US market (7.9% per year).

High Growth Revenue: ADBE's revenue (11.8% per year) is forecast to grow slower than 20% per year.

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: ADBE's Return on Equity is forecast to be very high in 3 years time (43.9%).

Discover growth companies

Past Performance

How has Adobe performed over the past 5 years?

Past Performance Score

3/6

Past Performance Score 3/6

Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE

25.5%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: ADBE has high quality earnings.

Growing Profit Margin: ADBE's current net profit margins (29.3%) are lower than last year (38.8%).

Past Earnings Growth Analysis

Earnings Trend: ADBE's earnings have grown significantly by 25.5% per year over the past 5 years.

Accelerating Growth: ADBE's has had negative earnings growth over the past year, so it can't be compared to its 5-year average.

Earnings vs Industry: ADBE had negative earnings growth (-12.4%) over the past year, making it difficult to compare to the Software industry average (18.7%).

Return on Equity

High ROE: ADBE's Return on Equity (35%) is considered high.

Discover strong past performing companies

Financial Health

How is Adobe's financial position?

Financial Health Score

5/6

Financial Health Score 5/6

Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage

Financial Position Analysis

Short Term Liabilities: ADBE's short term assets ($7.9B) exceed its short term liabilities ($7.4B).

Long Term Liabilities: ADBE's short term assets ($7.9B) exceed its long term liabilities ($5.0B).

Debt to Equity History and Analysis

Debt Level: ADBE has more cash than its total debt.

Reducing Debt: ADBE's debt to equity ratio has increased from 24.2% to 29.5% over the past 5 years.

Debt Coverage: ADBE's debt is well covered by operating cash flow (176.4%).

Interest Coverage: ADBE's interest payments on its debt are well covered by EBIT (64.4x coverage).

Balance Sheet

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Dividend

What is Adobe current dividend yield, its reliability and sustainability?

Dividend Score

0/6

Dividend Score 0/6

Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Cash Flow Coverage

Dividend Yield vs Market

Notable Dividend: Unable to evaluate ADBE's dividend yield against the bottom 25% of dividend payers, as the company has not reported any recent payouts.

High Dividend: Unable to evaluate ADBE's dividend yield against the top 25% of dividend payers, as the company has not reported any recent payouts.

Stability and Growth of Payments

Stable Dividend: Insufficient data to determine if ADBE's dividends per share have been stable in the past.

Growing Dividend: Insufficient data to determine if ADBE's dividend payments have been increasing.

Earnings Payout to Shareholders

Earnings Coverage: Insufficient data to calculate payout ratio to determine if its dividend payments are covered by earnings.

Cash Payout to Shareholders

Cash Flow Coverage: Unable to calculate sustainability of dividends as ADBE has not reported any payouts.

Discover strong dividend paying companies

Management

How experienced are the management team and are they aligned to shareholders interests?

4.2yrs

Average management tenure

CEO

Shantanu Narayen (58 yo)

14.67yrs

Tenure

US$36,128,725

Compensation

Mr. Shantanu Narayen has been Chairman of Adobe Inc. since January 2017 and has been its Chief Executive Officer since December 01, 2007 and served as its President since January 2005 until December 2021....

CEO Compensation Analysis

Compensation vs Market: Shantanu's total compensation ($USD36.13M) is above average for companies of similar size in the US market ($USD12.88M).

Compensation vs Earnings: Shantanu's compensation has been consistent with company performance over the past year.

Leadership Team

Experienced Management: ADBE's management team is considered experienced (4.2 years average tenure).

Board Members

Experienced Board: ADBE's board of directors are considered experienced (7.3 years average tenure).

Ownership

Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: ADBE insiders have only sold shares in the past 3 months.

Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.

Data	Last Updated (UTC time)
Company Analysis	2022/08/12 00:00
End of Day Share Price	2022/08/12 00:00
Earnings	2022/06/03
Annual Earnings	2021/12/03